I used 2checkout for several years, but stopped when I did the math one year. They advertise a %5.5 fee, and .45 cents per transaction, but in the real world it’s a lot higher. I did some math with our total sales minus all the fees one year and came up with a staggering %9.49. How do their fees get so high? Good question.

It all lies in their dispute policy, if a customer contacts 2checkout instead of you about a refund, they automatically grant the refund and charge you a dispute fee which ranges up to $50 each time. One customer was instructed to return the product to the 2checkout office and then they gave them a refund for it without contacting us. The 2checkout employee kept the $700 item…yeah.

A 2checkout account isn’t like PayPal or a merchant account, in that they won’t let you win a dispute of any kind. With PayPal they give you several days to respond, and then a staffer goes over it all and if you’re in the right, often times a merchant will win the dispute.

With a merchant account it’s similar. It goes to arbitration a with Visa or MasterCard dispute (American Express are done directly with them, not an outside company). The whole process settles if you can prove with tracking numbers if you shipped an item, or if someone is trying to get a refund outside your stated policy, or whatever the dispute might be.

Overall, you’re strongest position as a seller is with a merchant account shipping goods with a tracking number, PayPal isn’t bad either, but I’ve had problems occasionally (it was like the employee wasn’t even reading my emails and just tossed me a form letter). Also with PayPal there’s going to be a certain number of customers who contact PayPal first instead of you just because that’s who sent them the invoice when they bought online. With something like a merchant account gateway your company contact information is all they ever see, so they’ll likely contact you first before calling their credit card company.

I spoke with 2checkout about their policy and they said if someone does several disputes (called a serial refunder) then they ban that credit card from being used for further purchases. The real problem (for the merchant) is their unwillingness to allow a dispute process. This lets them automatically collect the $11-$50 fee (if your dispute rate goes above %4, it’s $50 a pop). You can limit this to some extent by setting your option to only accept orders from certain countries, but there’s still a general feeling of helplessness in being a 2checkout merchant.

How they compare:

2checkout advertises 5.5 percent and .45 cents per transaction, restricted goods can climb much higher at their discretion. On a refund or dispute they charge that fee again. I was told by an employee they charge their fee “anytime money changes hands” including refund transactions.

PayPal is 3 percent with no transaction fee. On refunds, they also refund the merchant that 3 percent. Hefty $25 chargeback fees if the person disputes it with their credit card company.

Merchant account rates depend on a few things. First off it’s important to sign up with an underwriter who works directly with the bank or you’ll never get the lowest rate. Second and third tier agents are so far down the line they have to resort to “introductory rates” which expire in six months to a year and then you’re socked with a sky high rate (like an adjustable rate mortgage). I did Internet promotions for one of these places and soon learned the tactics they used.

That being said, it’s realistic to lock in a 1.9 percent rate (that never goes up) with an underwriter like my friends at MST who’s at 800-715-8053. Transaction fees with an Internet Gateway (a secure shopping cart they provide) are usually about half of 2checkout. There’s an industry standard $25 chargeback fee, but you’re much less likely to get one with a merchant account, because the customer contacts you first in most cases, because your store and company name is all they see. Compared this to going through PayPal or 2checkout, a lot of times they don’t remember where they bought it from when buying online and just contact the payment processor.

Overall I’ll never go back to using 2checkout after seeing how much money their fees amounted to. The fact that they don’t disclose that if you give someone a refund, they sock you with the %5.5 again is just the icing on the cake. If I had a real underwriter merchant account those years instead, I’d be about $34,000 richer.

If you’re currently in the same boat, call MST at 800-715-8053. You can also use their secure form at this link. The reason why I trust them, in this industry is you won’t get a sale pitch, just honest advice on how to save money from what you currently have.  You can also email him here

Probably the most rewarding thing from this site, was a guy in the UK and he saved him over $2,600 a month in merchant fees from his current Paypal situation. With a 2checkout merchant, at the same volume, it could easily be double that in savings.