Math behind choosing Paypal, CB, or merchant account for receiving payments... are my numbers right?

Yes; yes - they have, funnily enough. Enormous numbers of marketers and businesses have, now you mention it. Such enormous numbers that it's extremely widely used, in fact.

Apart from the fact that it's how millions of customers want to pay, you must mean?

It's strange how many people seem to think otherwise, isn't it? Do you think perhaps they've all realised that if their customers can't pay by PayPal, then it's going to cost them an untold fortune in lost sales?

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One point that should be made about Paypal is that while fees start at $0.30 + 2.9% per transaction, it's possible to get that down to 0.30% + 2.5% or even $0.30 + 2.2% if you have sufficient monthly volume.

<<Also has anyone done numbers on authorize.net or other merchant accounts? >>

One point that should be made about Authorize.net is that they are primarily a *gateway company*. They're a great gateway. However, if you get your merchant account through Authorize.net, you might end up paying more that way.

The numbers on merchant accounts can be all over the map. I have seen processor statements in the past where *big* merchants were paying an effective rate that was in the 3.5% - 4% range. It's also possible to pay more like 2% with a merchant account (give or take).

If you are looking for a merchant account and you want to minimize fees, then you should look for interchange plus pricing from a provider you trust. I have before me a statement for a merchant who processed about $113K in March. Their total processing and gateway fees for the month were $2067 on 372 sales. This works out to an all in cost of $0.20 + 1.74% for this particular e-commerce merchant. Even if they had Paypal's low rate of $0.30 + 2.2%, they would have paid $534 more in processing fees for the month ($2601 in Paypal fees - $2067 actual fees = $534).

This of course is just one example. Different merchants will pay different average effective rates based on a variety of factors (card types, industry, face-to-face vs card not present, etc.). What I can say with certainty that we have lot of e-commerce merchants who are averaging 1.9% - 2.1%.

I should note that some merchants actually prefer fixed pricing even if the overall fees are higher. The appeal of fixed rate pricing for some is that one always knows the cost of each transaction up front. However, even in the case of fixed rates, it's sometimes possible to do better than Paypal. For example, if your average sale was $25, then $0.15 + 2.7% fixed would be better for you than a $0.30 + 2.5% rate from Paypal. In these cases, one just has to run the numbers based on the specifics of the business.

Finally, for many businesses, Paypal vs merchant vs something else doesn't have to be an either/or decision. If your shopping cart supports it, you might want to consider offering multiple payment options. Some people love Paypal. Others dislike it (or mistakenly think you need a Paypal account to pay with a credit card). In the end, there's probably no answer that's right for every situation.