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. Basically, iZettle updated their app and it wouldn’t install on my phone. When I contacted them, they basically told me my phone wasn’t supported – even though it had been up until then. They nearly destroyed my business overnight, and effectively told me “tough”. I was not happy. They came back to me sometime later and apologised for their error – apparently, the app had been given an incorrect filename on Google Play, and that was the cause of the problem – and gave me almost £1,000 of free transactions – but it was too late. In the two weeks it took for them to admit their mistake, I had purchased and started using a PayPal Here card reader.
I’d considered PayPal Here even before iZettle. But at that time, PayPal Here was brand new, and staff were even more inept than iZettle’s, and more or less told me any money I took wouldn’t be accessible to me for 30 days because of a “reserve” that existed on the account I’d set up. I wrote about that at the time. PayPal was easily the better option on paper, but not having access to my money was obviously a major issue, so I went with iZettle.
To this day, I have no idea what the hell was going on with that “reserve” malarkey, but when iZettle went titsup I contacted PayPal again, and in the intervening time they appeared to have recruited people who knew what they were doing and actually wanted to do it for me.
So, anyway. Armed with a new PayPal Here reader and a reserve-free PayPal account in 2015, I set to work.
Since then, I have taken more than £50,000 in card payments through PayPal Here (I’d also taken a fair bit through iZettle before that). As time has gone by, the number of people paying me by card has increased, and right now I’d say that about 70-80% of pupils pay that way (2018 card takings look like being about 30% higher than in 2017). The rest still use cash (someone block-booked 30 hours of lessons a couple of weeks ago and paid me £700 in notes, which I banked, because it isn’t mine yet), a few use bank transfers (a couple of months ago a new pupil’s father paid me £700 for a block booking this way), and a couple have routinely paid using contactless apps on their phones. 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 by contactless (if pupils have them) but anything above £30 has to be by PIN (contactless phone apps depend on the app they’re using, and one pupil easily paid for £50 two-hour lessons contactless this way).
Since I began using it, PayPal has updated the app several times, and it is extremely convenient being able to sign in 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, too (it says it can take “up to 2 hours”, but less than a minute is typical). With iZettle, it took nearly a week – and we’re talking a business week here, so Bank Holidays both here and in Sweden mattered – for money to get into your bank account.
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?
At the moment (2018), a PayPal Here card reader costs £54.00. They have special offers from time to time, where the machines are cheaper than this, and my backup was purchased when an offer was in place.
How much do they charge per transaction?
It’s 2.75%. For each £25 lesson paid for by card, you “lose” 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.
The charges are a rip off
Fine. Keep taking cash.
You’re not going to get away from transaction charges. 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 tend to be the older ADI who thinks this way, 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 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 and lost lesson time, and cheques (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, since £1,000 of cheques in your wallet is pretty useless. I’d been waiting for something like PayPal Here or iZettle – and there are others – to appear, and got in on the ground floor.
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 card payment from them. This might become less true in the future as the dinosaurs gradually die out, but right now it works in a highly positive way.