Pay Pal vs Merchant Account

A proper headline would be third party payment processors vs a merchant account. Google checkout and Pay Pal are good examples of third party payment processors. In a recent survey only 44% of PayPal customers and 19% of Google Checkout customers rate their purchase experience as good or very good.* So what are the differences?

Fees
Third party payment processors don't require you to have a merchant account. In a sense your using their account and they are charging you for the privilege, but higher fees aren't the only differences.

Funds
Your money goes directly to your account usually two days faster with a merchant account. Third party payment processors store your money for you making you request it be deposited to your account. This can add 3 to 4 days before you see your money. When your money is in your bank it is FDIC insured, not so with third party processors.

Dispute Resolution
When your the merchant account owner you are represented by your acquiring bank and reseller, both of which want you to get paid. Google Checkout and Pay Pal are known to freeze accounts first ask questions later. The problem with this is that their customer support is non-existent, try to find a phone number for PayPal and when you email them you get back canned responses that are not helpful. Talking to a person is very important when your money is involved.

* Survey of online shoppers conducted January 2007 by J.P. Morgan