💡 In some jurisdictions, convenience fees may be prohibited. It is your responsibility to follow applicable laws. If you are unsure whether such laws apply, consult with your legal counsel. |
Note: For a more detailed explanation of this calculation, check out this guide.
Let's say you've charged a client convenience fee and your client is asking: "What is this convenience fee for?" Our recommendation is this answer: I am charging a convenience fee to cover my processing fees. It's best to keep things simple if you can.
What if your client asks you what your processing fees are? The answer seems simple: just be transparent and share your processing fees. That's fine to do and totally up to you, but keep in mind that it comes with an extra burden: explaining how the convenience fee is calculated. Why is that a burden? It's not only because the math is complex, but because your client may reach the wrong conclusion given the information they have:
- An invoice amount of $100 (excluding the convenience fee)
- A convenience fee of $3.94
- Your credit card processing rate, which can vary but is typically 3.5% + $0.30
Your client will likely want to verify that they are getting charged the correct convenience fee given your credit card processing rate. They may do some quick math:
Then they may say, "Wait, that is 3.64% + $0.30, not 3.5% + $0.30, what gives?" There's a subtle problem with the formula above: it doesn't include the correct amount that the credit card processing fee is based on. The correct amount is the total amount charged, which includes the convenience fee: it's $103.94, not $100.00. Here's the correct math:
Now the math checks out: the convenience fee of $3.94 is clearly based on the example credit card processing rate of 3.5% + $0.30.
Comments
2 comments
is there a way to include the convenience fee with the trip total vs showing an additional line item on the invoice for the convenience fee?
Chinwe Umeh great question! The convenience fee is required to be shown separately from the total. That said, you're welcome to turn off having your clients pay the convenience fee and increase the price of the items or your markup to reflect the processing fee!Â
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