I've read that many MSC's pay via paypal. When I sell something on e-bay, I get charged a 3% fee from paypal. Does it work the same way when you get paid via paypal from a MSC?

So... if you do a $15.00 shop, you get paid $14.55 after paypal takes their cut?

The vast majority of MSCs will absorb the PayPal fee IF that is the only option they allow your for payment. Companies offering more than one option to the IC will make their preferred method free and pass along fees for any others. For example, Second to None and Stericycle both offer direct deposit at no charge. If the IC chooses PayPal the 3% will be deducted.

Yes, LisaSTL got it right. Researching MSPs should include their policy on paypal fees. You must have run into one of those that charge a fee. See if you can change your payment method.

Thanks for the info. I just did my first shop today, so I haven't been paid for it yet. I've been looking at other MSC sites (mostly SASSIE sites), and the only option appears to be Paypal or "other". My full-time job is in financial data services and software... so I'm wondering why these companies don't offer direct deposit (via the Federal Reserve Bank) as their primary option instead of Paypal. This option would be cheaper for both the shopper and the MSC in the long-run.

But, if the MSC pays the fees... then I really don't care.

Again, thanks for the info.

Are you sure DD would be cheaper for the MSC? In many cases the companies are small, really small. What makes sense for the corporations could be cost prohibitive to a company with only a few clients.

It's true that the larger your volume of transactions, the cheaper the per-transaction fees are for direct deposit/debit when you use a 3rd party to originate your transactions. Most financial institutions transmit directly to the Federal Reserve Bank (FRB ) with the few exceptions being very small community banks and some small credit unions, but this requires an up-front investment which would probably be cost-prohibitive for a small business.

For businesses who don't want the up-front costs (and the requirement to use software named "FEDLINE" from the FRB on a totally closed system), there are plenty of companies out there who will originate your transactions for you. They typically charge less than a dollar per transaction, with NO percentage fee based on the dollar amount of the transaction.

I just did a quick search, and Bank of America offers this service, but their website doesn't have pricing. It's probably based on volume and/or business account balances. There's another company (paysimple.com) and they do it for $0.55 per transaction, no matter the dollar amount of the transaction.

At 55 cents per transaction, that means that it would be cheaper to use paysimple.com instead of paypal as long as the payment amount (including reimbursement) is larger than $18.97 (0.55 / 0.029 = 18.97). Therefore, as long as the MSC's average payment amount is larger than $18.97, they'd save money by using paysimple.com. If the MSC is smart (and if their software is smart), they will combine all of your shops for the month into a single payment to minimize the number of transactions per month. It's hard to imagine that any MSC has an average transaction amount less than $18.97.

There are some financial institutions which will originate your transactions for FREE, as long as you have a business savings/checking account with them. One of my former employers offered this service, free of charge, to all business account holders. They even supplied the software for free. All you had to do was enter the information into the software and press SEND. You could also import files from many of the most popular accounting softwares (Quickbooks, Peachtree Accounting, Goldleaf, etc) to eliminate manual data entry.

I'd be willing to bet that Bank of America and most of the other large banks probably offer lower prices than paysimple... probably with pricing that depends on the balances in your business accounts at the bank. The large banks have such a huge volume of transactions going to/from the FRB that the per-transaction fees that they pay are so small that it's easy for them to make money while charging very low rates.

As an example of Bank of America's economy-of-scale... an individual with a checking account at BofA can use their checking/savings account at any other bank or credit union in the USA as a source of funds for paying their bills via the BofA website. They can also transfer money freely between their Bank of America account and their accounts at other financial institutions... all from BofA's website... and all for free. BofA does this by originating debits/credits through the FRB... and they don't charge you a dime for that service... because they pay such a low fee per-transaction that it's worth it for them just to provide this extra service to make their customers happy.