When you choose to pass the credit card processing fee to your client, you might expect we simply add the fee to the invoice. But there's a catch: the fee is calculated on the total amount your client pays, not your original invoice amount.
This creates a circular problem that requires a bit of algebra to solve.
Why "Just Adding the Fee" Doesn't Work
Let's say you have a $1,000 invoice and the processing fee is 2.9% + $9.30.
The commonly assumed approach:
- Calculate fee on $1,000: ($1,000 × 2.9%) + $9.30 = $38.30
- Charge client: $1,000 + $38.30 = $1,038.30
The problem:
The processor takes 2.9% + $9.30 of what the client actually pays ($1,038.30), not your original $1,000:
- Actual fee: ($1,038.30 × 2.9%) + $9.30 = $30.11 + $9.30 = $39.41
- You receive: $1,038.30 − $39.41 = $998.89
You're $1.11 short because the fee was calculated on a smaller amount than what was actually charged.
The Correct Formula
We need to find the amount the client should pay (let's call it y) so that after fees are deducted, you receive exactly your invoice amount (x).
Starting with:
x = y − fee
x = y − (y × 2.9% + $9.30)
x = y − 0.029y − $9.30
x = y(1 − 0.029) − $9.30
x + $9.30 = 0.971y
Solving for y:
y = (x + $9.30) ÷ 0.971
Example with the Correct Formula
For a $1,000 invoice:
y = ($1,000 + $9.30) ÷ 0.971 = $1,039.44
Verification:
- Fee on $1,039.44: ($1,039.44 × 2.9%) + $9.30 = $30.14 + $9.30 = $39.44
- You receive: $1,039.44 − $39.44 = $1,000.00 ✓
The client pays $1,039.44, and you receive exactly $1,000.00.