Should You Pay as You Go, Or Pay Monthly and Save?

GoPayment is quickly becoming the payment system of choice for small business owners who want to join the mobile payments revolution. Once you open an account and plug in the free credit card reader, anyone can start accepting credit card payments using a smartphone or tablet.

Not only does GoPayment make credit card processing easy and convenient, it also provides business owners with two payment options. For swiped credit card transactions, GoPayment users can choose to pay 2.75 percent of the transaction amount. Or if for a monthly fee of $12.95, users can enjoy a lower swipe rate of just 1.75 percent. (Notice that you are never charged an extra flat transaction fee on each swipe, like some credit card processors do.)

So how do you decide which approach is right for you? Should you pay as you go, or pay monthly?

Determine Your Monthly Revenues

The answer depends on how much transaction revenue you expect to process using GoPayment’s mobile payments system. If you’re just going to need GoPayment for a handful of small customer transactions (like for food purchases at a festival or inexpensive knickknacks at a craft fair), then the pay-as-you-go method is probably your best option.

But if you plan to use GoPayment regularly and frequently or process high-dollar credit card transactions (like photographers and mobile consultants might), then you may want to pay the monthly fee and enjoy the lower swipe rate.

But at what point are you better off paying as you go versus switching to the monthly fee option?

Travel Back in Time to Algebra Class

The “magic revenue level” above which a monthly payment would make sense can be determined using a simple algebraic equation. (And you thought you’d never use algebra in real life!) Just translate the swipe rates into decimal form and solve for x. Here’s the math.

.0275x = .0175x + $12.95

Solve for x and you’ll find that

x = $1,295

In other words, if you will use GoPayment to process more than $1,295 worth of credit card transactions each month, it’s more cost-efficient to pay the monthly fee in order to receive the lower swipe rate of 1.75 percent. But if your total monthly GoPayment transaction amount will be less than $1,295, you’re better off forgoing the monthly fee and paying the 2.75 percent fee per swipe.

Of course, the choice is up to you. Many users find that starting with the 2.75% rate when they’re just getting their business going makes sense, then switch to the 1.75% rate plan after their business starts to grow.

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