I originally posted this article in October 2015, shortly after I started using PayPal Here to take card payments from pupils. Before then, I’d been using iZettle, but I had an unfortunate experience with them which forced me to find an alternative. They eventually admitted they were in error, but it was too late and I had purchased and started using a PayPal Here card reader.
Since 2015, I have taken more than £70,000 in card payments through PayPal Here. As time has gone by, the number of people paying me by card has increased, and right now I’d say that about 90% of pupils pay that way. The rest still use cash (occasionally, someone will block book and hand over up to £700 in notes), and a few use bank transfers (block bookings sometimes come in this way). I refuse to take cheques – if someone has a cheque book, they have a card, and I can read that instead.
The PayPal Here reader can carry out transactions via contactless, PIN, and swipe (though swipe is not necessary in the UK). Single hour lessons can be paid using their card by contactless (if pupils have them) but anything above £30 by card has to be by PIN. Contactless phone apps depend on the app they’re using, and many pupils use these to pay several hundred pounds with no trouble.
Since I began using it, PayPal has updated the app several times, and it is extremely convenient being able to sign into the app using my fingerprint these days.
The massive benefit of PayPal over iZettle is that the money from a transaction goes into your PayPal account instantly. When you transfer it from there to your bank account, for all practical purposes that is instant as well (it says it can take “up to 2 hours”, but less than a minute is typical). iZettle took nearly a week most times – and we’re talking a business week here, so Bank Holidays both here and in Sweden (where iZetlle is based).
How long do PayPal Here payments take to clear?
For all practical purposes, they’re instant.
When you take a card payment either by chip & PIN or contactless, funds are instantly transferred to your PayPal Here account. You can leave them there, or transfer them to your bank account whenever it suits you – either from the app or from PayPal on your computer.
My only minor gripe is that you have to transfer the money manually – you can’t set it to go straight into your bank account. It’s on my wish list.
How much does the card machine cost?
Under £50 right now – often less if they’re doing an offer. I have three of them as a result of offers just so I have backups, though I am still on my first reader.
Is there a monthly rental fee?
No. You buy the card reader outright and only pay a fee per transaction.
How much do they charge per transaction?
It’s 2.75%. For each £25 lesson paid for by card, you “lose” 69p.
PayPal takes 23p for each £1 you take
NO. THEY. DON’T.
I saw some clown state this recently, and it’s bollocks. On a £25 lesson, the fee is 69p.
Other card reader vendors have lower fees
I’m not saying you must use PayPal. Just be aware that other vendors’ fees are often on a sliding scale (iZettle’s was), and you only get the lower rates if you take more than a certain amount per month – which for an ADI is often quite high. I triggered iZettle’s lower rate fees a couple of times, but the lower rate only applies to takings above the threshold.
For example, if there is a threshold at takings of £5,000 per month, and you pay 2.75% up to that, and 2.5% above it, then if you take £5,500 in that month, you pay 2.75% on £5,000, and 2.5% on £500. To get any real benefit, you’d need to be taking £10,000 per month or more. Small multi-car driving schools might benefit, but a self-employed ADI wouldn’t.
SumUp has a fee of 1.69% per transaction. Yes, that’s less than PayPal’s fee. In a typical year, with SumUp you’d be paying £634 in fees. With PayPal you’d be paying £1,030. I like PayPal (and a lot of pupils use it anyway), and think the extra I pay is worth it. That’s just me.
Some vendors have no fees
And they keep the money longer to get interest on it to cover their costs or charge a rental fee. There’s no free ride when it comes to clearing card payments, and someone somewhere pays for it.
The charges are a rip off
Fine. Keep taking cash.
You’re not going to get away from transaction charges if you also want a decent service. A fee of 69p is nothing on a £25 bill. All you have to do is increase your prices slightly and you’ve covered the fee, anyway.
But I can save money if I don’t have to pay transaction fees
As I say. Fine. Keep taking cash. You probably also believe your car isn’t an overhead because you own it (it is), and that if you don’t have to pay a franchiser then you’re better off by the whole franchise fee (you’re not). A card fee is an overhead, that’s all.
I can’t see the point of taking card payments
Fine. Keep taking cash. It does seem to be the older ADIs who think like this, though.
For me, from the day I first became an instructor, the ability to take card payments was on my wish list. As years went by, having to carry lots of cash around (sometimes, a heck of a lot) and dozens of cheques – and make frequent trips to the bank – was becoming a major headache. Bank branches, especially convenient local ones, are an increasingly endangered species, and with parking fees and lost lesson time, and cheques (which are useless to you until they’re banked, and some weeks, every pupil would pay by cheque), it was more like an atomic migraine than a headache. There is a business cost associated with that, which is proportional to how often you have to go to pay money in. With cheques especially, I’d only have a cash flow if I went to the bank. I’d been waiting for something like PayPal Here or iZettle – and there are others – to appear, and got in on the ground floor.
What about cheques?
What about them? No one has attempted to pay me by cheque for at least 4 years now (though they only did before because it was either that or cash). A couple of new pupils have asked initially if I take them, but when I point out the card machine and the fact that everyone has a card even if they have a chequebook (otherwise cheques are pretty useless), it’s never mentioned again.
I can take pupils to a cashpoint
Good for you. I, on the other hand, don’t need to. The card machine becomes the cashpoint, so it’s more convenient for me and more convenient for them. And that is certainly not going to affect their opinion of me in a negative way. Of course, if I insisted on frog-marching them to a cashpoint… who knows what they might think?
Is it of any benefit to take card payments?
As I said, it has saved me a lot – in monetary terms, and in terms of my sanity.
But another benefit is less tangible. Some pupils might be impressed if you pull out an iPad and have a glitzy demonstration video to get some point across. Believe me, many more are impressed when you tell them you can take card payments – even more so when you actually take a payment in front of them and they get an instant texted receipt. This might become less true in the future as the dinosaurs gradually die out, but right now it works in a highly positive way.