How to calculate payment costs
Payment cost is what the processor keeps: a percentage of the whole order including the shipping the customer paid, plus a fixed fee per transaction, plus the surcharges that are not on the headline rate. Cross border and currency conversion are frequently larger than the quoted percentage, which is why the blended rate on your payout statement is never the rate on your rate card.
This cost is charged , .
Your rate
3.5% of the whole order including the shipping the customer paid, which is 1.89. Modelling it on ex VAT revenue understates every order by the same proportion.
per cent of the order
On one order of 1 unit at 49.00 plus 4.90 shipping, it books 1.89.
Your P&L, on that order
At most, because 2 costs are still missing. A cost you have not given has no figure at all, never a zero. Everything you type stays in your browser.
The base is the whole order
The percentage is charged on what was captured, which is the goods plus the shipping the customer paid plus any tax collected. It is not charged on your ex VAT revenue, and modelling it on the smaller base understates the fee on every order.
The fixed fee is per transaction, so it matters in inverse proportion to order value. At 2.9% plus 0.30 an order of 25.00 pays an effective 4.1% and an order of 200.00 pays 3.05%. If your average order value moved this year, your effective payment rate moved with it and nobody changed a rate card.
The ones that are not on the rate card
Cross border. An extra percentage when the card was issued in a different country from your account. On a shop selling into several markets this is routine, not exceptional.
Currency conversion. Charged when you sell in one currency and settle in another, on top of everything else. It is on your payout statement rather than on your rate card, which is where to read your own figure.
Chargebacks. A fixed fee per dispute whether or not you win it, plus the reversed order.
Buy now pay later. A different rate entirely, often several times the card rate, and usually a separate line on the payout report.
Added together, these are most of the difference between your rate card and your payout statement, and the statement is the one that is true. Both are worth knowing: the rate card tells you what to negotiate, the statement tells you your margin.
One rate per gateway, not one rate
Cards, a wallet, a marketplace and a pay later provider have four different rates, and the mix between them changes month to month without anyone deciding anything.
The honest model is a rate per gateway, applied to the orders that actually used it. That is what the break-out above does: a row per channel or gateway, a rate on each, and one row for everything else. A single blended rate is a rolling average of last month’s mix, which is why it never quite matches the statement.
When the fee belongs to
The fee belongs to the order that caused it, on the date of that order, not to the day the payout landed. Payouts batch several days of orders, net of refunds and fees, and reconciling them is a separate exercise from costing.
Refunds are the case that catches people out. On most processors the percentage is not returned and the fixed fee never is, so a refunded order leaves you with a cost and no revenue. That cost belongs to the refund, which means a per refund shape, not a percentage of a sale that no longer exists.
The check
The payout report is the check, and it is a good one because the processor has no interest in your model.
Take one payout period, sum the fee column, and compare it against what your rates produced for the orders in that period. Then divide the fee total by the gross captured to get your real effective rate, and compare that against your rate card. The gap is the cross border, the conversion and the disputes, and it is usually the largest thing on this page that nobody had written down.
Where it usually goes wrong
This is one line of the statement. See where it sits.
The other guides
Vecks works all of this out on your own orders and shows you where each figure came from. Ask for a seat.