Fees on Payment Processing and How to Minimize Them

It is so easy now for anyone to start taking payments from customers online.

But the fees can be a little confusing at times.

In this article…

I’ll walk you through the different fees you will incur and discuss methods of minimizing those fees.

Basic Fees on Popular Payment Processing Options

Freelance Platforms – Worst Option for Taking Payments

The worst culprits for fees are freelance platforms.

Freelance platforms can take as much as 20-30% of everything you make.

• Outschool takes 30% of everything you make. If you charge $50/hour, Outschool takes $15 of that.
• Amazing Talker takes between 15-30% depending on how much you’re earning. The more you earn, the less they take. Amazing Talker may at times offer discounts to customers on your lessons as well as charge other fees like regional transaction taxes and transfer fees.

Teachers’ rates on freelance platforms tend to be a race to the bottom. The platforms celebrate the few teachers who started early and have higher rates, but the more new teachers join the platform, the more they are tempted to set their rates lower to attract students. They are hoping they can eventually raise their rates, but often, they get stuck and end up having to pack in classes back to back in order to make the income they need to support themselves. If you want to see what rates you should be charging for going independent, check out this calculator ->

These platforms also own your relationship with the customer and can effectively take your entire business from you if you fall foul of their algorithm or business goals. You can read more on the strengths and weaknesses of teaching on freelance platforms here ->

Stripe – Best Option for Taking Payments

Stripe has some of the best rates available for payment processing: 2.9% + 30¢. You can double-check their current rates here.

In Stripe, if you’re activating and using alternative payment methods like WeChat or AliPay in Stripe the pricing is a little different. You can find the fees for these options here. 

Also, if you charge in a currency other than you own and then have it converted to your own currency to be deposited in your bank account, Stripe charges a 2% fee.

PayPal – Widely Trusted, But Higher Fees

PayPal fees are higher than Stripe’s for accepting payments. They charge 3.49% + 49¢ for payments accepted in your own currency. There is some variation depending on the type of checkout you are using. You can find more about Paypal fees here.

There’s an extra percentage taken of 1.5% for all transactions taken in a currency other than your own and then a fixed fee that varies by country. You can find a list of PayPal’s fees here which includes the fees charged for accepting payments in other various currencies.

Wise – Use in Tandem with Other Processors to Save on Currency Fees

Wise has the lowest fees of the payment processors covered in this article. Wise is a little like PayPal, but doesn’t have nearly the same level of acceptance, or offer the same number of tools or integrations for taking payments.

I’ve included Wise because you can use it in tandem with the other payment processing options to help you save some money on fees. Wise can work just like a bank account. You can transfer money from Stripe or PayPal into your Wise account. After the money is in Wise, you can take advantage of their lower fees to convert the money into other currencies.

You can view fees charged by Wise here.

Minimizing Fees

Avoid freelance platforms, or use them only as a launching pad for building your own business.

You could, of course, not use PayPal for accepting payments and only offer Stripe since Stripe’s fees are so much lower. This is definitely an option to consider.

But…

Our goal is to please our customers and reduce as much friction as possible at checkout.

We want our customers to be able to pay with whatever payment method they feel most comfortable with.

Minimizing PayPal Fees

PayPal is a widely accepted and trusted payment method in many countries around the world. If you’d still like to offer PayPal as a payment option to your customers, there are a couple of ways you can reduce fees.

To reduce PayPal fees, you can…

1. Not accept payments in a currency other than your own. The fees are a lot higher for accepting other currencies.
2. If you need the money in a currency other than the one you’ve accepted with PayPal, transfer it to Wise first and then convert it into the currency of your choice. Wise has much lower fees.

Minimizing Stripe Fees

The biggest extra fee you can incur with Stripe is converting funds to your own currency. If you’ve connected a US bank account and charge your customer in British Pounds, you will incur the 2% fee on top of the exchange rate when transferring those funds to your US bank account.

To avoid this fee, you can…

1. Open a bank account in British Pounds and connect it to Stripe – This option is not usually very helpful
2. Accept payments only in US dollars – Regardless of where your customer is paying you, they pay in US dollars
3. Take payments in British Pounds, but then transfer the money to Wise which has the lowest fees. Wise works like a bank account. After the money is in your Wise account, you can then transfer it to your bank.

Did I miss anything? Have a question? Leave a comment below!