💡 Note: If your client wants a simpler explanation of the convenience fee, check out this guide. |
If you're here, you may have wondered "why does it look like my client is charged more than expected when I enable the client convenience fee?" That's a great question! Before we take a look at the math, let's clarify a couple things:
- The goal of the convenience fee is to transfer the total invoice amount into your bank account. In other words, when you create an invoice totaling $100, you expect $100 to be deposited into your bank account.
- The convenience fee on a $100.00 invoice is not the same as the credit card processing fee on $100.00. This can seem counter-intuitive, so we'll explain in detail below.
First, let's look at the convenience fee formula:
depAmt: the deposit amount, our goal ($100)
ccPer: the fee charged per transaction ($0.30)
ccPct: the credit card fee rate (in this example, 3.5%)
convFee: the convenience fee amount to charge in order to get the deposit amount
Let's plug in the numbers and do the calculation:
So, in order to satisfy our goal to get $100 deposited given the example credit card processing fee of 3.5% + $0.30, the client convenience fee must be $3.94.
Now, let's look at why the convenience fee on a $100 invoice is not the same as the credit card processing fee on $100. Here's the formula for credit card processing fees:
chargeAmt: the charge amount ($100)
ccPer: the fee charged per transaction ($0.30)
ccPct: the credit card fee rate (in this example, 3.5%)
ccProcFee: the credit card processing fee
Let's plug in the numbers and do the calculation:
So, the credit card processing fee on $100 is $3.80. Now we have proof of #2 above: the convenience fee on $100 is not the same as the credit card processing fee on $100 ($3.94 vs. $3.80). This is why calculating the client convenience fee can feel counter-intuitive.
Why can't we just charge a client convenience fee of $3.80? Well, let's do the math on charging the client a total of $103.80 ($100 + $3.80 convenience fee):
With a credit card processing fee of $3.93, you would end up with only $99.87 in your bank account. That doesn't satisfy the goal of depositing $100 into your bank account.
Hopefully, this helps! Please let us know if you have any questions or need more clarification.
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