The 2 % Business Turn-Off

Recently I ordered services and was very happy to have found a supplier. We had agreed prices, scope and timescale of the project. Later I received the contract by email and started reading it. Everything seemed to be as agreed, until I got to the payment terms. There I found an unusual insertion:

We will charge 2% extra for PayPal payments.

Te motivation is quiet understandable, Paypal will charge you 2% to process your inward payment. But should you really charge your client extra for this? I would think not, since this is a great business turn-off. More business is lost through little charges here and there, it generates the feeling in the buyers mind of hidden charges. While at the same time the buyer will wonder why he/she should pay for the suppliers bank charges.

I was given options to send a cheque or pay by bank-transfer. This makes the whole situation even worse, since you would be inclined to send a cheque, which would take weeks to clear through the banking system - this was a international transaction. You would certainly not use the bank transfer option since it would cost even more. The whole problem was no made easier by demanding stage-payments.

It seems to me the solution here is to increase your prices by 2% and don’t talk about it, or enquire before hand which payment method should be used. One needs to remember that getting payed is of the utmost importance for any small business, so PayPal seems a good way to go in this instance.

Look at your payment terms and do not create unnecessary business barriers. — ST.

6 Responses to “The 2 % Business Turn-Off”

1. Navtej Kohli
   http://www.navtejkohli.biz
   
   Said on February 25th, 2008 at 8:05 pm

   Hello Stefan, I agree to what you said about not charging the client the extra money. Most businesses fail due to not taking care of these small things.

2. Ross
   http://www.WizardNewz.com
   
   Said on February 26th, 2008 at 4:04 am

   I never did understand the charging extra myself. If you use any merchant acct or any third party credit card processor they will charge you no matter what. So why is it that I have only seen people charge extra for paypal but no others. I can usually see both sides but this one has always escaped me.

3. Stefan Töpfer
   http://www.winweb.com
   
   Said on February 26th, 2008 at 8:23 am

   More than anything I think it is a bad practice for the small business, as it creates unnecessary barriers and will loose business and sales.

   You don’t charge for the heating of your office either, but you could make the same argument as for the paypal charge.

   So my advice - see it as what it is, a cost of doing business - and add it to your price as standard.

   Stefan

4. Robert Moore
   http://www.business-sale.com
   
   Said on February 29th, 2008 at 3:49 pm

   Any merchant might get a better result by upping prices a little but saying 2% discount if paying by a method that suits the merchant more.

5. Stefan Töpfer
   http://www.winweb.com
   
   Said on February 29th, 2008 at 4:09 pm

   Robert, like usual a great comment - thank you.

   Stefan

6. Chris Norton
   http://www.chrisnorton.biz
   
   Said on March 6th, 2008 at 4:46 pm

   Hi Stefan, interesting post. Paypal is a great service but speaking as an eBay powerseller it’s also an expensive one. If you use eBay for your small business they charge you around 7% to sell something and then Paypal take a further 5%.

   I completely agree with Robert - they should just add it to their costs and offer a discount if you use a different service. However, as an eBay regular seller will know - you can’t do this on their platform - so we just have to grin and bear it.

   Chris

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