How does Pinch calculate the fees when surcharging customers?
Recursive Surcharge
Some merchants choose to pass on the Pinch merchant fees to their customers (the payer) in the final charge, which is calculated as part of the gross amount. This takes into account that increasing the final amount also increases the Pinch fee based on GST/VAT and Pinch's Flat fee, plus a percentage of the total charge. This is calculated below.
The flat fee and the total charge percentage must be factored into the final charge amount to ensure that you receive the desired amount after Pinch deducts the fee from the charge.
Put simply, when you choose to surcharge your customer, they pay the fees on your behalf, and those fees are not the same exact rate that you as a Merchant pay. You should never quote your clients your Merchant rate, as this is not truly reflective of the final fees once the surcharge calculation is taken into account.
Summary: Recursive Surcharge Calculation
Goal: You want to receive exactly $100 after fees.
Formula:
P_charge = (P_goal + F_fixed) / (1 - F_percent)
Step-by-Step:
-
Fixed fee: $0.30 (30 cents)
-
Percentage fee: 1.75% = 0.0175
-
Desired amount (P_goal): $100 (10,000 cents)
Plug in values:
P_charge = (10000 + 30) / (1 - 0.0175) = 10208.65 cents = $102.09
Outcome:
-
Customer pays $102.09
-
Total fees: $2.09
-
Merchant receives exactly $100
The fee is calculated on the entire charge, including the fee itself - hence “recursive”.