Do I absolutely need a Merchant Account?

Nov 5th, 2011

If you want to do it right – yes.
It’s almost like asking "Do I need a business license?" or "Do I need to pay taxes?"
You might get away (for some time) without doing it, but eventually it’s going to catch up with you.

While you can certainly choose to use PayPal or Google Checkout, take the following into consideration:

  • You might lose certain customers who do not consider these payment options as trustworthy.
  • Both Google and PayPal have their own Terms of Service and potential restrictions. Always read the fine print.
    You can find the current PayPal User Agreement here (26 pages, PDF).
    In addition, PayPal uses their own Legal Agreements and in the User Agreement refer to frequent Policy Updates.
  • PayPal or Google Checkout do not allow you to customize or integrate your Shopping Cart or Checkout pages into your store’s experience, causing customers to lose trust or confidence in your operation or question the legality and validity of your business *.
PayPal is NOT a bank. Your money is deposited into a PayPal Account which PayPal fully controls. Since PayPal is NOT a bank, they do NOT need to follow federal banking regulations.
PayPal has a reputation for freezing customers’ accounts for without warning and for no apparent reason. Once your account is frozen, the funds are often held for months with absolutely no recourse for the merchant.

* Since you are required to prove you are a legitimate business when applying for a Merchant Account.

While PayPal is the preferred payment method on ebay (mainly for convenience reasons AND because they are 100% owned by eBay), a full Credit Card Checkout is always the most trusted option in an online store.

About the author:

Nina Khoury is a computer scientist, software engineer, data and information junkie and online marketer. She taught at various universities for more than six years and worked on projects for Fortune 500 companies including cisco, Intel and HP.