Payment processing fees

The exchange spread is a fee

A processor that advertises "no transfer fee" can still take 3%. It does this by converting your money at a rate worse than the mid-market one and keeping the difference. Nothing on the statement is labelled as a charge, because the cost is built into the exchange rate.

This is why comparing advertised percentages between processors tells you little: they compete on the published fee and say little about the spread. I recommend working out your own spread instead. Divide the amount that arrived by the amount in the original currency, and compare that rate with the mid-market rate for the day you were paid. The gap, as a percentage, is the figure the calculator asks for.

Two deductions do not add up

A 2.9% fee and a 2% spread take 4.84%, not 4.9%. The spread is taken from what the processor left rather than from the invoice. Say you bill 1,000. The fee takes 29, and the spread takes 2% of the remaining 971, which is about 19.42 rather than 20. Together that's 48.42, or roughly 4.84% of what you billed.

The difference is small on one invoice. However, adding the two percentages is wrong in the same direction every time, so over a year of invoicing your deposits won't match your own estimate.

Working backwards is a division

To receive a set amount, divide by what the processor leaves you. Say you want 1,000 to land and the processor charges 2.9%. Invoicing 1,029 leaves you short, because the 2.9% is charged on the invoice total, not on the 1,000. You keep 97.1% of whatever you invoice, so the invoice has to be 1,000 ÷ 0.971, which is about 1,029.87. I recommend doing this sum once per processor and keeping the multiplier in your notes. It's the same division as taking VAT out of an inclusive total.

The error from the quick version grows with the rate. At 2.9% it's the 87 cents on 1,000, and it's more at the higher rates some cross-border processors charge.

The order these are applied in

The fee comes off first and the exchange spread second, which is the usual sequence. The payment is taken in the currency it was made in, the fee comes off there, and what is left is converted. Some processors convert first.

The difference between the two orders is about a cent on 1,000. If the calculator's figure disagrees with your statement by a cent, I'd look at the order first, because it's the likely reason.