Hi, right now I offer vacation apartments for free through my website but we also offer a service where a person can deposit the rent to us plus a fee and after the vacation is done the renter gets the money minus the fee as an insurance for the client. Now we are thinking of extending our service to foreigners (mostly US citizens) but how can I survive the credit card fee? If the house costs 500 to rent I would normally charge 5% commission which is ok as there are no transactions fees however if I want to charge the customer it would be 500 + 25 and out of the 525$ there would be a ~2.5% credit card fee which is ~13 dollar i.e. half the profit. Is there anyway to only charge the ~2.5% for the profit (i.e. 2.5% out of 25$) or do I need to redo the model i.e. charge almost 8% instead of 5% for credit cards? I feel that I most offer credit cards to be able to attract US clients. Best regards, TomDeSuecia
What country are you from? I'm going to give you a comprehensive answer, but I need to know that first. ( I'm US based)
Hi, the business is located and registered in Mexico. Thanks for your answer. Best regards, TomDeSuecia
Alrighty... buckle in for this one it's gonna be fun. Credit Card Fees - There is no real way to get around the fees associated with each purchased issued by credit card companies. If you are registered with them directly as a merchant, then you would be able to discuss a waiver or dissolution of the fees in exchange for a lump sum, taken from the company on a specific date. Country/ Taxes - Be it that you are offering this service and you are an online company, I would suggest creating a platform where you are able to accept all forms of payments ( I know Paypal and AuthroizeNet offer this option but you may want to do more research and check). Be it that you are not on US soil you aren't subject to our taxes. But I would check to see what the regulations are for your country regarding all taxes for your LLC ( Are you an LLC, if not you may want to do that ASAP to protect yourself - see the next section). LLC/ Corporate Protection- Since you are accepting payments, be it Paypal or another merchant, you may want to Incorporate yourself or become a private LLC. Separating your funds from your company's is important. A traveler can state the arrangements they booked were not up to their standards, reverse their payment with their credit card and YOU would be responsible for remitting the payment. The credit card company and rental property owner ( if you don't own the property) can then seek legal action against you primarily. So take care of that ASAP. Rate- I would suggest increasing the rate to 8 - 10 percent and stating the breakdown of the payments in a contract for each purchase. By notifying the potential client that the rate accessed is kept for " administrative fees" this allows them to subconsciously accept the payment with an understanding of when they will receive certain funds by a specific date. If you need more help, just let me know.
Thanks for your answers, really good! As you said there doesn't seem to be another way then to increase the commission for credit card purchases and inform the customer about the fees (laying it out nicely). For people not minding going to the bank or using there internet bank do you know if there is an easy way (without using SWIFT codes etc.) to transfer money to Mexico? Would it be possible to open a bank account in an international bank (HSBC for example) and having US customers send money to this account easily? First I was brainstorming of opening a bank account in US but then the IRS will be able to audit me and tax me which is something that I would like to avoid (no illegal stuff, just a big inconvenience). Best regards, TomDeSuecia
Okay Let me answer each of your questions one by one: 1.For people not minding going to the bank or using there internet bank do you know if there is an easy way (without using SWIFT codes etc.) to transfer money to Mexico? - No. Every penny that is generated or utilized towards this business will always be trackable unless the clients pay you in cash. This is why it's important to become incorporated. It's one thing for your business to saturate the associated costs but another for you individually to absolve the fees. It's best to Incorporate, set up a business account, link the account with a payment merchant like AuthorizeNet or Paypal and go from there. The Client's bank or credit card merchant wont dispute the charges or lose a sense of credibility with your business if you do it this way. 2.Would it be possible to open a bank account in an international bank (HSBC for example) and having US customers send money to this account easily? - You can open an account with HSBC but your still subject to taxes if you accept money that's being sent this way. US customers are not going to feel comfortable sending money from account to account. This would make it seem like you are just a private owner trying to scam them out of their money and HSBC wouldn't want to take the risk of being responsible for for any claims filed by the clients or you if your information gets stolen. Open a business account and realize that you will have to pay fees. Your best bet is to charge 2 - 5 percent in addition to the fees you list in order to cover such fees. Do you have a website you operate off of? How were your payments previously accepted? Are you in a position to incorporate yourself?
Hi, once again thanks for your answer. You're right that I just need to accept the fees and charge those fees to the client. Right now we have a office where clients comes to buy or rent their house and then we upload them to different sites but those are only for Mexicans. The payments was done directly with cash or bank transfer. That is nothing strange here in Mexico, people are still afraid of using credit cards. Yes, I'm in a position to incorporate myself. If I do this I will probably get an investor so that I can hire someone to find more houses, help with support, setup the homepage, setup the payment options etc. so that would most likely be a demand from the investor. Once again, many thanks. Accept the fees and incorporate! Best regards, TomDeSuecia