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Question

How do you cover payment and banking fees?

For some more context:
I’ve been freelancing quite a while now, but I’ve recently started working with several international clients.
While clients in the UK (where I am) can just transfer money into my bank account without either of us paying a fee, this isn’t the case for international ones.
I’ve had people pay by PayPal, in which case there are exchange rate issues and fees, Stripe which charges a fee for credit card use, and so on.

Do you charge extra to cover these fees?
Say I do work for someone worth £1,000 – should I be invoicing £1,005 to cover the fee, for example? Or do you just eat it as a cost of doing business and write it off on your taxes.

Answer

To directly answer the question, it would be wise to adjust your rate to consider any banking or payment fees. Whether you are using PayPal or some other service a payment processing fee is going to be anywhere between 3% and 8%. Banking fees tend to vary a widely primarily if you’re working internationally with your client base and exchange rates come into play.

Though you could adjust your pricing to consider payment and banking fees, there’s something larger here that is going on. As a creative professional not only do you need to adjust for payment and banking fees, but you also need to consider what you want to take home at the end of the year.

When you take into account taxes that will occur at the end of the year, this changes the conversation. Not only do you need to account for banking and payment fees you also need to consider for state tax, country tax, VAT as well as any sales tax that may be a part of the process. This means you have to ask yourself the question: “when I am working with a client what do I want to take home each client?”

You can see an example of this in episode 35 of the freelance jumpstart TV podcast called pricing for profit. In this episode, I dive into this specific topic but as a quick and simple here’s something to consider.

For the Freelance Jumpstart Course, I build a calculator that takes into account all the rates and overhead. Here is a screenshot from that lesson:

This means if I wanted to take home $80,000 at the end of the year I would need to make $104,000 which is 30% more then initial take amount of $80,000.

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