We use Stripe as our transaction processor for card and ACH payments. Stripe handles all the personal financial information you and your residents share when you make payments.
Whenever one of your residents pays their dues online, transaction processing fees apply. Obviously, that’s how transaction processors make their money. But what may not be quite so obvious is how those transaction fees apply.
First, let’s talk about who pays transaction processing fees.
When you create a dues item, you’ll see a checkbox labeled “Enable Service Fee.”
- If you activate that checkbox, your residents pay the transaction processing charge on top of their actual dues amount.
- If you don’t activate that checkbox, the transaction processing charge is deducted from the amount that Stripe transfers to your bank account.
Second, let’s talk about how transaction processing fees are calculated.
For card payments, the fee is
3.5% of the face value of the dues item + $0.30
For ACH payments, the fee is
1% of the face value of the dues item + $0 for items that are ≤$625
and
0% of the face value of the dues item + $6.25 for items that are >$625
That’s pretty much straightforward. Now for the less-obvious part.
When you first contemplate transaction processing fees, you may assume they apply via simple calculation.
Let’s take a $100 dues item as a hypothetical example.
It looks as if the card fee should be
3.5% of the face value of the dues item, which is $100 + $0.30
That’s $3.50 + $0.30 = $3.80
for a total of $103.80.
But if you process a payment for $103.80, you only receive
$99.867, which rounds to $99.87.
Huh?
That’s because the math is a little more complicated than it looks.
Here’s how it works.
When you apply transaction processing fees to a dues amount, you present a total for processing. You know that part of that total represents a processing fee, but the transaction process only sees a lump sum.
So the processing fees apply to the lump sum of the payment, not just to the dues amount itself.
The real calculation is this:
(Dues amount + 0.30) / (1 - Processing fee percentage)
Plugging in actual numbers from our hypothetical $100 dues item, that’s
(100 + 0.30) / (1 - 0.035)
That yields
$103.9378238, which rounds to $103.94.
If you activate the “Enable Service Fee” checkbox and make sure the correct values are entered into the fee boxes, you don’t have to worry about this calculation. The system takes care of it for you.
NOTE: ACH payment account setup involves a $1.50 account verification fee. This fee is deducted from the amount transferred to your bank account. However, the deduction may not coincide with any specific resident payment—because the fee relates to when a resident sets up a bank account for ACH payments, which may occur long before they ever use the account to remit their dues. This is a one-time fee. However, account verification applies any and every time you add an account this way, so if you remove a bank account and later add it again, the fee applies a second time.
NOTE further that of the 3.5% card-processing transaction fee, 0.6% goes toward our research and development. Of the 1% ACH-processing fee, 0.2% also goes toward R&D.