Parents expect prices to go up. From gas, to meat at the grocery store, to haircuts, as small businesses reopen, we know that business owners are looking for ways to make up revenue they lost due to COVID-19.
That also applies to childcare, preschool, and school-age programs. Parents know you need to replace some of that missing income, and they expect to see that in the form of higher tuition.
They also know that it would be far easier and more convenient if they could use a credit card right now, as ready cash isn’t nearly as available as it was when the economy was booming just a few short months ago.
So what’s holding you back from accepting electronic payments? Many Center Directors hesitate because of the cost.
And while it is true that accepting credit cards and echecks isn’t going to be free, it can actually be free to you. To understand how, you’ll need to understand the costs that can be associated with processing payments, like transaction fees.
What are transaction fees?
These are fees charged whenever you process a payment. Most fees are set up to charge a small flat fee per transaction, plus a percentage of the transaction total. This is standard when it comes to electronic payments, but it can vary by merchant and credit card type.
For example, transaction fees for Discover credit card payments are usually quite a bit higher than Visa and Mastercard payments. You can side-step higher fees by deciding which types of electronic payments and credit card types you are willing to accept in your EZ Payment Services gateway.
Credit card payments in general are more costly than ACH (echeck) payments because part of those transaction fees pay the card issuer for their services. ACH payments transfer money from bank account to bank account, so there is no card service middle-man taking up space and charging for services.
What are the other costs of processing credit cards and electronic payments?
The cost of processing credit cards and other electronic payments can add up if you don’t factor in all the extras to make sure you’re not paying too much and are able to budget for those expenses in advance. Unlike EZ Payment Services, aside from per-transaction charges, some merchant account providers will levy additional fees.
Application & Setup Fees
Beware a merchant account service that promises low transaction fees but charges you to set up your payment account so you can start accepting credit card payments. There are other payment account providers, like EZ Payment Services, that won’t charge a fee just to apply or get your gateway established.
Monthly Maintenance Fees
These flat fees can be confusing, because if you aren’t using your gateway, you shouldn’t be paying to maintain it. Think of it like a gym membership – you sign up, take a turn on the treadmill once or twice, and then never seem to have the time to go back. Every month, you see the charges on your bank statement, and every month, you wonder why you are paying for something you don’t use.
There’s no such thing as accepting electronic payments for free and having instant access to those funds without being charged a transaction fee. When you use an outside payment service to accept payments, most of them still charge fees, and the ones that don’t – like Venmo – build in a 48 hour delay before funds reach your account.
That’s how they make their money, on the interest generated from holding your money for those two days. While this isn’t a direct cost to you, it does cost you the interest you could be collecting on those funds, and it delays your access to your money.
This is more of an empirical cost than anything else, but time is money. Regardless of whether you’re paying transaction fees or just accepting the wait for funds to reach your bank, you still have to record those payments in your AR database. That is time you or your staff are taking every week, whether it is recording payments that came in on time, sending out late fees, chasing parents for late payments, then recording those when they trickle in. That time spent is also money spent, because it is time your staff could spend doing other things.
Offsetting Transaction Fees and Costs of Credit Card Processing
Accepting electronic payments doesn’t have to be an expense your organization absorbs. There are two ways you can offset the costs of any transaction fees and pass it off to parents:
Bake in a new expense line to your budget
School’s out for the summer, but back-to-school is right around the corner. This is your opportunity to take a good hard look at your tuition and expenses, figure out how you can incorporate transaction fees, and decide how you want to offset some of those costs.
Each year, when you create or update your budget for the coming year, you review your expenses, update each line item with data-backed estimates for what’s to come, and then calculate what you need to collect in tuition and other revenue.
This year, when you set your tuition, multiply it by 3%, then add that to a new income line called “Convenience Fees.” Next, add an offsetting line to your expenses called “Transaction Fees,” and use the same amount as you entered in the Convenience Fees income line.
When you communicate next year’s tuition, use your original tuition amount plus the additional 3%. Doing so will allow you to pre-collect transaction fees so parents can choose to pay by credit card.
Charging convenience fees
By carefully choosing the right merchant account provider and offsetting some of the transaction costs, you can absolutely cut your share of the transaction fees to little, if not all, of the expense. You do this through careful research to ensure you’re getting the best processing rates, and by charging convenience fees when parents use credit cards.
Convenience fees are common, whether you’re paying your electric bill online, withdrawing cash from an ATM, or paying childcare tuition. For organizations who offer the choice of cash vs. credit cards, choosing to charge parents at the point of sale – a per transaction cost of about 3% or so – works just fine. This can be accomplished easily by setting the fee in your management system.
For EZCare, convenience fees are set up and saved in your organization’s setup, and they are charged automatically any time a parent uses that method of payment. For EZ-CARE2, convenience fees can be included in your Click-to-Pay forms.
Give Credit Cards a Try
Because EZCare and EZ-CARE2 only charge for transactions you process, and they provide you with ways to pass those costs along to parents, there is absolutely no risk in trying it out.
Not quite comfortable with relying on this type of payment method for tuition? Start small by allowing credit card payments for registration fees, PTO memberships, or activity fees, and see if it can work for you. If you don’t see the benefits of more timely payments or convenience, you can always go back to cash and checks without any hassle or cancellation fees.