In this fee overview, we'll review how credit card processing and market fees are calculated and applied to orders. This information will help suppliers and market managers understand how the system has calculated the net amounts you see in the system.
Local Orbit both estimates these fees before transactions and calculates these fees based on the actual transactions that have occurred in your market. However, each transaction is different, and it may not be possible for you to perfectly predict how these fees will be applied. Only base your AP/AR information on the finalized transactions that have occurred.
Credit Card Fees
Credit card processing in Local Orbit is done through Stripe. For more information about Stripe, please read our Stripe FAQ. Credit card fees can be paid by the supplier or by the market, and this is set by the market.
Stripe charges 2.9% + $0.30 per transaction. Here is how fees are applied:
1. Suppliers pay the processing fees
When suppliers pay the processing fees, Stripe divides the $0.30 by the number of suppliers that had product in the order (Note: Unless you know how many suppliers will be included in an order, you will not be able to accurately calculate the proportion of the $0.30 that will be charged to a certain supplier). The 2.9% is calculated on the total sale price for the products the supplier sold.
The equation: (Total sale price) * .029 + $0.30/(number of suppliers in the order) = Credit card fee
Here's an example:
Suppler #1 sold 8 units at $1.41/each = $11.28 - Their fees are 11.28 * .029 + .3/2 = $0.48
Supplier #2 sold 50 units at $2.44/each = $122.00 - Their fees are 122 * .029 + .3/2 = $3.69
The total processing fees are $4.17 on a total sale of $133.28.
2. Markets pay the processing fees
When the market pays the processing fees, this fee is subtracted from the market's fee. To calculate the processing fees, you simplify the equation to be:
(Total sale price) * .029 + $0.30 = Credit card fee
Using the same example above, the Fees would be calculated like this:
133.28 * .029 + 0.30 = $4.17
Occasionally, you'll need to issue a full or partial refund on a credit card order. Stripe will refund all of the processing fees on full refunds. For partial refunds, Stripe calculates the fee refund like this:
(Original fee amount) / (Original order total) * (refund amount) = Fee amount that is refunded
Markets will often have a market fee, which helps them cover their costs for the services they provide to suppliers and buyers. This is always a percentage of the total product sale. The market fee is never applied to the net price of a product or to any delivery fees!
Calculating the market fee is simple: (total product sale price) * (market fee percentage) = the market's fee
Using the example above: 133.28 * .15 = $19.99 OR
Supplier #1 - 11.28 * .15 = $1.69
Supplier #2 - 122 * .15 = 18.30
Markup vs. Market Fee
The market fee is NOT a markup and is never applied to the net price for an item. To further clarify this, let's look at an example of a markup vs. market fee:
Let's say you have a 20% market fee. You want a supplier to receive $1.00 for a unit of product. Because the market fee is taken from the sale price, the system calculates the sale price to be $1.25 (1.25 *.20 = .25, which gets you $1.00 net). If you think of the market fee as a markup, you'd expect the sale to be $1.20. But since the market fee is calculated on the sale price, it would be 1.20 * .2 = .24 and 1.20 - .24 = $0.96 for the net.
Credit Card and Market Fees - Understanding and Calculating the Net
The calculations for actual transactions can become more complex. It's important to remember that the net prices you see in the system are estimates. In fact, on the pricing page for each product it's called Estimated Net Price. Let's use the example above again just using Supplier #2 for simplicity.
First, we'll calculate the net price for the product Supplier #2 sold. To do this, we need to know two things:
1. The market fee is 15%
2. Suppliers are set to cover the credit card processing fees. (If your market covers the fees, ignore the credit card calculation in the table below)
Supplier #2 listed their product at a sale price of 2.44. The system calculated an estimated net price of $2.00. Why $2.00? The system subtracts the market fee and credit card processing fee from the sale price to produce the net:
|2.44 * .15 =||.366|
|2.44 * .029 =||.07076|
|Total:||.43646 (rounded to .44)|
This gets us the $2.00 estimated net price.
Why doesn't the net include the $0.30 portion of the credit card fee? For two reasons: 1. The system distributes this across all of the suppliers in an order, and 2. It's applied to the entire order not an individual unit. Subtracting $0.30 from the net of a single unit can skew its price and would be an inaccurate reflection of the how the fee is charged. In the case above, it would lower the net to $1.70.
That's how the net price per unit is calculated. Now let's look back to Supplier #2's portion of the order above:
Supplier #3 sold 50 units at $2.44 = $122
So the total market fee is $122 * .15 = $18.30
The total credit card fee is: $122 * .029 + .3/2 = $3.84
The total net for the supplier is $122 - $18.30 - $3.84 = $99.86
How does this compare to the estimated net unit price we calculated earlier?
99.86/50 = $1.9972 - it was only off by about $0.01 per unit
If you're doing this on your own - don't round up any decimals until the final total is calculated.