Credit Cards? PayPal vs Square vs Local Bank - Surprising Personal Study Results

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Always At Your Service
Had a chance to talk with a local banker who was interested in helping my businesses become more profitable with smart banking. Frankly, I haven't thought about taping into local neighborhood resources since forever ago.

Currently, I have PayPal (on-line only) and Square (mobile app only).

PayPal is a flat 3% of the total purchase, and when linked to an active bank account, can have the funds transferred almost immediately although it takes three business days to complete after the request for transfer. The upside is that there are no limits and there are no monthly or per transaction fees. Everything is done on-line via a browser. I know nothing about their new mobile app device. The downside is that PayPal can be very stringent and delay or stop payments

Square is a mobile app only using a small electronic card reader device that inserts into the smart phone's head phone. Transactions are either swiped (2.75%, no per transaction costs) or keyed (3.5% and 15 cents per transaction) and there are no monthly costs. The upside is the ease in which this whole process goes down and that money is automatically transferred to the linked bank account without having to ask. The downside is that there is a limit as to how much money is transferred on a monthly basis. If you do $10K/month, you may only immediately see $5K and have to wait 30 days for the other. Very important to clearly understand this policy , how to raise limits, and as with every CC function, understand charge back policies which almost always, contract or not, side with the payer not the payee.

In talking with my local bank rep, they provide a service that combines both aspects of Square and PayPal (on-line and smart phone, keyed and swiped). If using a virtual terminal, there's a $14/month fee BUT the vig is 1.39% for debit cards, 2.08% keyed, and 1.79% swiped. No per transaction fees. All funding is transferred the next day.

The study began with a modest single $5,000 monthly transaction base:

PayPal costs would be $150.00 (on-line only) transfer to bank account about 4 business days;
Square costs would be $$137.50 swiped or 175.15 keyed (mobile app only) transfer up to a certain limit two days, the remainder held for 30 days;
Local bank costs, including monthly charge of $14.00 added, would be $128.00 keyed or $103.50 swiped or $83.50 for a debit card, transfer all funds to account next business day automatically.

Annual credit card use cost estimates ($60k annual with 12 sales), all keyed transactions:

PayPal= $1,800.00
Square= $2,101.80
Local Bank= $1,536.00

The local bank said they will also help me integrate this service into my website design for direct on-line customer input. How much that'll cost remains to be asked in my next session of investigation. Also, because all of my financial dealings are in contract or legally valid purchase agreements, I am also going to ask and get in writing, chargeback philosophy and policy.

In short, it may be a good time to revisit your local banks for additional or replacement credit card acceptance options. It appears as though they have finally caught up with the times and are actually competing for our business against the almighty, never wrong, only the best deals can be found on it, internet.

Jim Weisz

ProDJ Sponsor
Staff member
Good info for anyone who wants to stick with cards. I take them, but since switching to Intuit IPN, I've saved thousands of dollars in CC fees. Most of my clients pay with an e-check, which costs me $.50 a payment and is automatically in my bank account the next day. 90-95% of clients just pay via check through IPN, but every so often I have a client ask if I can take a CC. So then I turn on the option to take CCs in my IPN control panel and turn it back off once the client has paid. The rate is higher than PP or Square, but I like having all my payments coming in through one system. This year I have saved over $2000 alone by using IPN.


Well-Known Member
The key thing to keep in mind is equipment costs if you plan on swiping the card manually. And not all banks are going to be as good as Cap's. But the recommendation to check them out by Cap is a good one.


Mobile Beat Moderator
Staff member
The one question I have for the bank, and this is an issue for me with offshore clients...

PP, Google, and Square will not run offshore credit cards.

We had a situation last year where one of our clients (consulate for another country) gave us their CC, but none of the services I mentioned would accept it.

Ran it through the old credit card terminal (Discover Financial Services), it was processed without issue.

Also had a similar issue with a Dutch company that had an event we were providing entertainment for.

Square and online are great, but I need a processor who will run offshore cards.


An Australia based company I've worked for has paid me without issue multiple times using my paypal account, there is an extra fee, but I haven't had a problem.


New Member
Jim's idea about Intuit IPN sounds like a great solution for accepting payments.

Paypal isn't perfect, but they've cleaned up their act in the last few years and offer a good service at a very competitive price. If you are doing low-volumes for credit cards it isn't worth the trouble of getting a merchant account. Paypal and Square should work fine. A lot of DJEP users use Paypal. Because of this we created an API system to integrate with Paypal payments.


Always At Your Service
I haven't had my meeting with the bank yet but have received a notice from Square that all back-holding fund limits have been eliminated.

There is no longer any more than 2 days from purchase to bank account funds transfer regardless of the dollar volume of the sale, the monthly accrued dollar volume, or type of transaction (swiped or keyed).


New Member
I have been told that there is no way to contact Square via telephone. That would seem to be a major downside to using their service.


Always At Your Service
Troy: Haven't had the need (yet) for telephone support however I did hear from them via email late last week that the limits on how much will be held for thirty days is done and over with. All funds, whether swiped or typed, irrespective of dollar volume, will be sent to your bank within two business days. Now if they could only drop those high fees for typed/keyed entries.

Hope all is well with your lovely family.


Always At Your Service
UPDATE (finally. Sorry, have been very busy.)

After sitting down with all the powers-to-be at Key Bank, asking all the tough questions smartly suggested by my brethren above, injecting real world numbers into my existing credit card acceptance choices (Square & PayPal, swiped & keyed) and other nontraditional banking offerings that I am charged for from my existing (BofA) institution such as free limited wire transfers, free unlimited check stop payment biz & personal, and mostly importantly LOCKED in credit card rates regardless of activity or dollar volume, no monthly fees, card reader (as Square does) for smartphone as well as on-line computer charging (as PayPal does), next day unlimited funds transfer into my biz account (which neither does), and a slug more features too numerous (and mostly inconsequential) to mention. The hook? I must maintain both personal and business accounts in a bundle. Break the bundle and all bets are off. That is not a problem at all as it is what I do now.

All this is smart business financial control which will save me an estimated $1,100/year in finance charges, another $250/year in wire transfer fees, a few bucks in stop payments, and other lesser but accumulative fees and charges. That's a couple a bottles of Absolut, my friends.

Now that it has made business sense numbers-wise, one of the most appealing factors is that when I have a problem, I not only have a local face to speak to in person, I have their cell number too. After waiting three days for a response to an urgent question I had for Square that almost cost me a sizable sale (which I ended up figuring out on my own in the nick of time), I now value this personal and local relationship more than ever.

Will I dump Square and PayPal? Let me just say I promise to take it out of the attic box and dust it off, then put it right back.

Thanks for reading.
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Steve Lynch

Well-Known Member
I agree Cap. I Hate bank of america, but I have locked in 1.1 % and no charge per swipe rates, as well as a face to face support network should I need it. I finally dumped the CDG commerce processing I had through WEDJ, as the rates were higher, and the suppot sucked. If I needed something, it took 3 days.. I remember I did this one event where I was running P.Diddy's card for $18,500 and it declined.. I ran it 2 more times and it declined again. I was mortified.. he was getting bit indignant, and I could not reach a live person.. 3 days later they returned my call.. By then I had picked up an envelope full of cash from his assistant.He had the money, CDG just didn't like the fact that I was running my first credit card charge in excess of $3000 which was my monthly limit.

It's not worth it to go with cheapo services, especially when it's all a write off anyway.


DJ Emeritus
I was running P.Diddy's card for $18,500 and it declined.. I ran it 2 more times and it declined again. I was mortified.. he was getting bit indignant, and I could not reach a live person.. 3 days later they returned my call.. By then I had picked up an envelope full of cash from his assistant.He had the money, CDG just didn't like the fact that I was running my first credit card charge in excess of $3000 which was my monthly limit.

MO Money, MO Problems (?)


Always At Your Service
Update on the Update:

I withdrew entirely from KeyBank's Commercial Services. The last step in the approval was getting some sort of an approval from an outfit that apparently doesn't deal with small business sole-proprietors. The questions were inane and impossible to answer. Then they asked about my network, how it's secured, and a bunch of technical questions that only a network guru would understand. I did my best but they declined certification.I asked for help from the KeyBank Credit Card interface but that too was useless.

So without all this addition certification (which was NEVER mentioned in advance), all the purported savings went up in smoke and now the rates are higher than Square or PayPal. Buh-bye to that service. Very disappointed in the lack of support.

So, (Pay) pal, I'm back to (Square) one.

(Yes, I know. Several folks above are waving their "I told you so" flags.Go ahead, I earned them.)


New Member

Sorry to hear it didn't work out.

I hear a lot of stories about folks being lured with lowering processing fees, only to get nailed by an unforeseen requirement or fee.

I'm not a huge fan of Paypal, but they are convenient, upfront, and have reasonable processing fees.


Active Member
I've been with Pay Pal for 3 years now. It's a little higher percentage, but it's peace of mind for me to know I don't have to worry about BS PCI compliant charges getting drafted from my account. And, no statement fees. It's one flat rate and simple.


MobileBeat Moderator
Staff member
I do not often do paypal, but have it available when a client wants to do a credit card. I'd say probably 10 transactions the last 5 years. everyone pays cash or check, even though I advise they can use a CC. Cap sorry to hear about that. it's a shame when you try to throw money at them, and they do not want it.


wuz here when it was Red.
another thing some people might not know about, is with Paypal you CAN charge the client extra money to compensate for the charges (VS cash)
When you use the banks services (visa,mastercard, debit) you CANT.. Pricing has to be the same whether the customer pays cash or charge.. (this agreement is in most contracts from the banks or credit service companies)


MobileBeat Moderator
Staff member
I remember some threads on this from years ago, and most people either were in the camp of charge them the extra fee or eat the fee and write it off a a cost of doing business. I dare say that this probably has not changed much since then. I write it off, modest as it is. every little bit helps.
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