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Going with a merchant account probably wont save you money, but it does increase your purchase rate since many people may not have a paypal account and don't want to deal with getting one.

Actually you don't need a PayPal account to buy via PayPal -- you can use a credit card. However, this message does not always get through to the customer, and PayPal can be picky about some cards (or vice-versa).

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Its been a while, but I recall that you -do- need to make an account - it gets created when you make your first purchase. But having to send people off to another site (where they get to reenter all their address info -again-) is a PITA and is not as 'professional'. Its getting more common... but if you made it through the hassle of getting a merchant account there is a bit of respectability there.

Also, we have encountered institutions (schools and businesses mostly) where there is strict policy that they may not use paypal.

There's an interesting edge condition i ean into during user testing. If you created a paypal account in the past, associated your credit card with it and then forgot how to access it - you cannot pay with your credit card. Paypal forces you to login with your old account. This along with paypal strongly encouraging people to create an account no doubt contributes to the "paypal requires an account" confusion.

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