Fixed princing or percentages, which is cheapest?

There are plenty of fixed pricing fees and tolls to give your hard earmed money to. You can hardly turn around without there being something that requires payment for either some kind of help or product to pay for. We all know that, so it can often pay to keep a stiff and focused eye on what you pay and when.

Sometimes it feels like comparing apples and oranges, because what is it exactly what your paying for, when there are more than one variable? When you have to consider both fixed pricing and percentages?

Administration fee, subscription and payment fee

Have you ever looked at an invoice and suddenly realised that there is an extra cost labeled administration fee? Or how about payment fee? According to Danish law, it’s completely legal to add fees to the consumers bills and thereby increase the amount to more than is paid to the payment provider, such as Yourpay, men there are certain rules that must be followed. For example, it must be clear that it’s a fee which is charged on top of the others and the pricing should be crystal clear. Customers should never think that they are paying one price and then charged another.

When figuring out which is most profitable, you need to add all the variables. These variables can be support, set up fees, additional service fees and subscriptions. With some providers you pay your transactions with a fixed priced fee and with others you pay by a percentage, but it’s interesting to look at what would most profitable. We’ve made some different calculations.

We can quickly agree that if you only take the percentage rates, which most often is more than one, then this is the most expensive. Quick mental arithmetic tells us that a transaction for 100 DKK, with a transaction fee of 1,45% is more expensive than a fixed priced fee of 1 DKK.

But, as we’ve just established, then there’s more often than not other fees hidden under other variables, which is why we think that those should be included.

Fixed pricing or percentages

The calculations for percentages

If our starting point is a company who makes 1000 transactions per month, with an average amount of 500 DKK, the calculations will differ greatly.

For a single transaction, with an agreement at Yourpay, the company would pay 1,35% of the 500 DKK. There’s no subscription, no fixed transaction fees and everything is included. The price for this transaction would therefor amount to 6,75 DKK. With a 1000 transactions of 500 DKK that amounts to a monthly invoice of 6750 DKK. That sounds like a lot when you can get a fixed price, of only 1 DKK with many of our competitors. I’ll give you that.

The calculations for fixed transaction fees

When that said, let’s make the calculations again, but with all the variables. Let’s assume that our competitors have a subscription fee of 200 DKK, a fee for support and various additional service fees (this could be subscription platforms, invoice payments, extra accounts, miscellaneous plug ins or something other) at a total of 500 DKK. There may also be a set up fee, but we’ll leave that out of the calculations, since it’s most often a onetime fee. The calculations are now significantly different, but let’s start by adding the subscription and additional service fees to the fixed transaction fee. If we distribute the 700 DKK to the 1000 transactions, then there’s an additional 0.70 DKK per transaction. The fixed transaction fee will then no longer be just 1 DKK, but 1.7 DKK and the price for 1000 transactions will be 1700 DKK. That’s a lot cheaper, wouldn’t you agree?

But hey, we almost forgot the card fee. There’s no getting around that. With an average price of 1.25% with many of our competitor, we’d have to add 1.25% to all the transactions. This means that we need to add 6250 DKK to the 1700 DKK. This adds up to 7950 DKK and then it’s no longer that cheap.

The many percentages

I know I wrote that the average is at 1.25% and yes, I know that you can get it even cheaper than that. I don’t deny that. Even with us, you can get even lower prices, but the criteria for getting that much lower requires a much higher revenue than 1000 transactions per month.

I’m not even saying that Yourpay is the only right choice. My only point with this blog post is that you need to take all the variables into account, and do all the grunt work, before you let yourself be dazzled by the fixed low transaction fees and hidden numbers. There is always something hidden underneath.

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