PayPal Fees
Found in: Fees Rates & Cost, Studio Policies
John N., Missouri
I’ve recently had a couple of new students ask if I take PayPal “the world’s most loved way to pay and get paid” Says that right on their website. I’m open to it, but want to know how others who use it handle the fees PayPal charges. (2.9% + .30 per transaction) Do you pass it on to the customer as a convenience fee…or absorb it as a cost of doing business?
A Thai N., California
I just accepted a PayPal payment from one parent not realizing about the fees. Not worth it. I prefer checks or cash.
Merri W., Georgia
I used Paypal frequently when my independent Kindermusik studio was operational. It was convenient for parents to use, and they didn’t have to have a PayPal account in order to use it. I absorbed the fees charged to me as a part of doing business, but, boy, did I *hate* seeing that money going into their (Paypal’s) pocket.
Another possibility for online payment is Google Checkout which is similar to PayPal but with slightly lower fees. The one thing I really liked more about Google than PayPal was that once I initiated a transfer into my bank account from them, it was usually done within 24 hours or less. With PayPal, sometimes it took several days to move. I don’t know if that was PayPal or my bank, but I do know that I never had a time issue with Google Checkout.
Robin T., Tennessee
I LOVE PayPal, and most of my parents do utilize it. I just write off the fee on my taxes. I don’t pass it along because for me, it’s worth it that I don’t have to wait for them to bring a check and then run it over to my bank. And, if I’m correct, there is some kind of law that does not allow you to “pass” that on to customers (you would have to raise the rates for all or something like that).
Additionally, I utilize their free Debit Card which makes the money available to me immediately. No credit check or anything like that to get it, it’s just like your bank debit card. If you have money, it works. If you don’t, it won’t. But, with that, I have my money INSTANTLY and I can withdraw it from an ATM to deposit or just use the card for my purchases. The card also pays you back 1% on your purchases, which helps to offset some of the processing fee.
I also utilize the PayPal app on my phone which will allow me to instantly send an invoice or money request to parents if they “forget”. For me, the fee is more than worth it to have the money in my hands immediately and not deal with collecting checks and making deposits. You can also send invoice for free through PayPal if you are looking for an invoicing service.
Terry S., Arizona
I’ve used PayPal for several years and absorb the costs as part of doing business. It’s a convenience for students and parents. At least, I think it’s a business tax deduction. I’m also going to add the Smartphone scanner from square app previously mentioned. Those transaction charges seem less than PayPal.
Mark M., New York
Robin is right that it is against their terms of service to charge a different amount in order to cover the fee.
There is a potential way around this in at least some circumstances. I decided not to offer PayPal in general as a payment method for everyone, because of those fees. However, for my online lesson students, I have higher rates and offer PayPal as an option. They do not see me in person each month, and so for some it is a convenience to use PayPal instead of mailing a check. This is not a violation of terms of service, though, because online lessons are a qualitatively different service from lessons in person. The terms of service say that you may not charge a different amount for the same service in order to recoup fees. Online lessons = different service, therefore justified to charge more, for whatever reason.
It’s of no concern to PayPal whether my reason for charging more is that I’m recouping their fees, or I have more overhead in videoconferencing equipment, or I spend a few minutes extra each week with my online students to ensure clear communication through that medium, etc. All of these things happen to be true, which is precisely why it’s a qualitatively different service, justifying different costs. And because I can charge more for that, I don’t mind offering it in those situations, i.e., as an option to my online students only.
[answer author="Patti P., Hawaii"]
Thanks for the mention of the debit card, Robin. I have offered PayPal payments for some time, but only a handful of my students use the option. I still think it’s worth it for the ease, even with the delay others have mentioned in moving money directly into my account. I’ll have to get the debit card, and that problem is eliminated.
Amber B., Michigan
I love having my business incorporated and all set up in Quickbooks. I pay myself as an employee and a set salary each month. I send in all my taxes monthly or quarterly and always know where I stand with my business. Recently, I started taking online payments via the Quickbooks statement I send to each of my students. The invoice offers to pay the invoice online from bank account to my business account. My fee is 50 cents per transaction. It has been very successful and I’m open to accepting credit cards via Quickboks as well.
Donny L., Ohio
I used Robin Thorpe’s advice for the last several years or so. She is an expert! I am happy with PayPal. What’s a couple of pennies? It’s a service I provide, move on. I don’t jack my clients with fee requirements, charge your share, pay your taxes and make more money. Your profit outweighs your taxes in this country if you’re on your game by far. Don’t trip over a dime to pick up a penny. We are entrepreneurs. I offer lower rates to my on-line-students throughout the planet. I never fail, because I deliver. Just ask my students. Payments methods are miniscule.