As a result of the pandemic, private lesson teachers are learning one of the lessons that other contractors learned when they moved online years ago: online payment processing fees can make a huge dent in your earnings.
Our early research suggests the average private lesson teachers who uses online billing is losing around $130 per month in avoidable fees—and possibly more. And while that’s not a ton on its own, over the course of a year, that’s nearly $1600 out of your pocket.
The following article lists some tips and tricks that can help you save a portion or all of those fees, while still making use of the incredible flexibility that online billing offers.
Find a cheaper payment processor
One of the first things you need to know about credit card processors, which are the companies that allow you to accept credit card payments online, tend to charge you in two separate ways for each transaction.
First, they charge you a flat fee on each transaction. This fee is generally around 30 cents. This fee is why convenience stores often have minimum purchase price before they’ll allow people to pay with a credit card. If they were to allow smaller purchases, the 30-cent fee would eat up their margin.
Second, credit card processors charge you a percentage of the total transaction. Typically, this will be around three percent, though it could be higher or lower, depending on the company, the plan you’re using, and the specifics of each transaction.
While some companies charge flat monthly rates instead of per-transaction charges, rate alone is usually more than you’d be paying for all your transactions, unless you’re doing more than a few thousand dollars a month in sales.
The good news is that the most popular payment processors generally use the same pricing. Companies like PayPal, Square, Stripe, and Wave, all charge 2.9% of each transaction in fees, plus 30 cents. QuickBooks’ credit card processing is a hair cheaper at 2.9% plus 25 cents.
If you’re currently paying more than 2.9% plus 30 cents on each transaction, you should consider switching to Square, Stripe, or Wave, since they don’t have a monthly usage fee.
Reduce monthly fees
Speaking of programs that are free to use, one way that many private lesson teachers can hurt their own bottom line is by overpaying for accounting and billing software. Relatively inexpensive platforms like QuickBooks Self-Employed start at just $7.50 per month.
If you’re paying more than that to send invoices, you can save a lot of money by switching to an option with no monthly fees. See the above section for services that don’t have a monthly fee for use.
If you do need an accounting or bookkeeping system, you should consider a free accounting tool like ZipBooks.
ZipBooks has a completely free plan and allows you to send unlimited custom invoices each month, allowing you to kill two birds with one stone. Plus, it lets you use Square or PayPal for payment processing, meaning you won’t be overpaying for your credit card processing.
Wave is another free accounting program with unlimited invoices each month. It also comes with its own payment processor and a really nice invoice visual builder that lets you create great-looking invoices, even if you’re not artistically inclined.
Another way you can save some money is by billing monthly. Since credit card processors charge a flat fee for each transaction, you can reduce your fees by reducing the number of transactions that you make.
For example, you could save money by billing your students monthly instead of weekly. While the percentage part of the fee will remain the same, you’ll save on the flat fee, since you’ll be doing fewer transactions.
In practice, you’d be saving about 90 cents per student per month by billing monthly instead of weekly. If you have 30 students, that’s $27 per month. While that may not sound like a crazy amount of money, it adds up to $324 per year, which means switching to monthly billing could save you about a car payment’s worth of fees each year.
The only thing worse than fees on credit card transactions is not getting paid at all. Thankfully, most parents are good about paying their bills, though not always on time. The transition to online billing can also mean that missed emails or credit card problems can result in delays to your payment.
The best way to solve these problems is to start using an online autopayment system. Instead of sending a bill each month, which has to be opened, and then paid manually by parents, autopay allows parents to enter their information once, and then get charged for the appropriate amount each month automatically.
Instead of getting sent a bill, they get a receipt. This process means that you’ll almost always get paid, and it increases the odds that you’ll get paid on time. It also allows you to set monthly pay-days for yourself, which can make your monthly budgeting easier.
Unfortunately, few of the free credit card processors offer autopay for free. However, we do have a solution for private lesson teachers specifically that we’ll cover in a later section.
Ask your clients to pay with debit or via bank payments
While this won’t universally be true, some payment processors will offer lower rates for debit card transactions or bank payments. While these are more common at in-person point of sale systems or during business-to-business transactions, some payment processors allow for their bills to be paid in these ways online.
For example, Wave only charges a 1% fee when customers pay with a bank payment, as opposed to 2.9% plus 30 cents on credit card transactions.
Stripe charges just .8% on bank payments, amounts to significant savings versus credit card transactions. As you can see, getting your customers to pay via a different method can save you a great deal of money on processing fees each month.
However, many parents will be unwilling to turn over the bank account details required for these transactions or won’t want the inconvenience of using debit or a bank account as opposed to a credit card. Consequently, making these changes may not always be practical.
Charge a convenience fee
You may have seen a sign at a convenience store that informed you that credit card transactions would incur an additional $1 convenience fee. As you might have guessed, the reason for that fee is the credit card processing fee that the store incurs when you pay with a credit card but when you pay with cash.
According to the Dallas Morning News, surcharges and convenience fees are legal in 42 states. Only Connecticut, Colorado, Kansas, Maine, Massachusetts, and Oklahoma ban the practice. Court cases in New York and California have challenged the bans in those states, with differing results.
One important thing to note is that if you charge a convenience fee, you must allow for your customers to use other payment methods. Allowing them to pay with checks or cash would satisfy this legal requirement.
The nice thing about this method is that you can save the entire processing charge by passing it on to your clients. This can lead to thousands of dollars of savings each year.
Use an integrated tool
We’ve suggested many different tools in this piece, all with different specific strengths and weaknesses. However, saving money on your monthly billing would be a lot simpler if you could just use one tool, right?
Right now, private lesson teachers are put in a difficult situation where they can keep teaching, but have to make a financial sacrifice in the form of credit card processing fees in order to do so.
We believe that shouldn’t be the case. Here at Quantum Renegade, we created the Lunch Break program to provide businesses with websites and tools that specifically fit their needs, while leveraging economies of scale to ensure that we can keep prices as low as possible.
Our Lunch Break for Private Lesson Teacher websites make billing as simple as possible.
With a Lunch Break website you can:
- Set up monthly recurring autopayments
- Accept credit cards
- Charge convenience fees
- Use pre- or post-pay options
- Let parents control their payments and see with receipts through an online portal
Plus, Lunch Break websites help simplify other parts of your job:
- Students and Parents can schedule appointments online
- Automatic recurring appointments added to your calendar
- Mark students as present or absent for their lessons (viewable in parent’s account)
- Provide documents (like sheet music) online in the student portal
- Automatically create Zoom meetings for prescheduled lessons
- Lesson rescheduling rules (i.e. cancellations more than 24 hours out will be refunded or given a credit for a future class, while cancellations within 24 hours will be charged normally).
We estimate that a private lesson teacher with 30 students is incurring around $130 per month in credit card processing fees. Our Lunch Break websites cost just $25 per month and can help you reduce or eliminate those fees, potentially resulting in savings of more than $100 per month!
In addition to the monetary savings, you’ll countless hours in scheduling and billing, as well as reduced late and lost payments, allowing you to spend more time doing the things you love, and fewer spent tracking down money and trying to schedule lessons.
We’ve made it super easy to get started, too. Just head on over to the Lunch Break website and pick a template that suits your business. We’ll have your website up and operational in two weeks, or your first month is free.