8 Reasons Freelance Editors Shouldn’t Avoid Payment Processing Fees

Payment processing fees are an unavoidable part of doing business online these days, but many freelance editors still try their darndest to avoid paying them.

While the rationale makes sense (you may be trying to lower your expenses and/or avoid the hit to your effective hourly rate), it can be risky to circumvent these fees.

Here are eight reasons why freelance editors and proofreaders shouldn’t try to avoid payment processing fees:

1. Making clients pay the payment processing fee is illegal in some US states.

If you’re adding a line item to your invoices like “credit card processing fee” or “Stripe fee,” you may be at risk of violating your state’s laws on credit card surcharges, i.e., any additional amount imposed at the time of sale for the privilege of using a credit card.

Some US states have deemed it illegal to add a credit card surcharge. This has been in flux over the past few years, as many states have fought litigation on this issue, but as of March 2023, Connecticut and Massachusetts still ban credit card surcharges. Colorado, my home state, banned these surcharges until July 2022 and now caps them at 2%.

If a client in one of these states is illegally made to pay a surcharge (or too much of a surcharge in Colorado), they can report you to the state’s attorney general.

Additionally, surcharging debit cards is illegal under federal law (thanks to the Durbin Amendment of 2010). This counts even when the client is running their debit card with just their signature, making it impossible for you to tell whether they’re using credit or debit when paying your invoice.

2. Making clients pay these fees goes against most payment processing companies’ terms of service.

It's important to remember that payment processors like PayPal, Zelle, Stripe, Square, and Venmo have detailed terms of service that must be followed. One of their main terms is that the service provider must pay the processing fee(s).

Stripe allows you to add an additional flat amount to recoup this expense, but you are prohibited from adding a separate line item for the fee. Instead, you must include it in the total price of the service.

Additionally, keep in mind that using a personal PayPal, Zelle, or Venmo account to avoid paying fees for business income is considered an abuse of their terms of service. Here’s what PayPal’s terms of service say about it:

If you use your PayPal account to receive payments for the sale of goods or services or to receive donations, you must:

• Pay any applicable fees for receiving the funds.

• Not ask your buyer to send you money as a personal transaction (often referred to as using the “send money to a friend or family member” feature). If you do so, PayPal may remove your PayPal account’s ability to accept payments from friends or family members.

Freelancers must have a separate business account to accept client payments when using payment processors—don’t be tempted to cheat the system by using your personal account(s) for this purpose.

If you violate a payment processing company’s terms of service, you could be banned from the platform or face costly fines or even legal action.

3. Some credit card companies prohibit sellers from charging a fee to accept their brand.

We’ve learned that credit card surcharges are illegal in some US states, and that trying to pass these fees onto clients goes against most payment processing companies’ terms of service, but there’s another level to this: the credit card companies themselves.

Let’s look at the top two contenders: Visa and Mastercard. Visa requires the merchant to give them 30 days’ notice before implementing a surcharge, and you need to make sure you’re not violating a state law in doing so first. Mastercard has a set of complex rules to follow if you’re going to implement any kind of surcharge.

This is already a lot to keep track of. Is avoiding a small fee really worth all this hassle and potential business risk?

4. Payment processing fees can be written off your taxes.

Now, on to a more positive note: as a freelancer, you can write off all your payment processing fees on your taxes at the end of every year! This can lower your tax burden significantly, helping you avoid a high tax bill.

This is especially important when we remember that freelancers are essentially double-taxed in the US. In addition to normal income tax, we’re also required to pay self-employment tax, which ensures that we’re contributing to Social Security and Medicare.

However, be aware that claiming a deduction for payment processing fees while simultaneously making your clients pay these fees can send a major red flag to the IRS. (And no one wants to receive that letter in the mail.)

By paying the fees yourself and writing them off your taxes, you can reduce your overall tax burden, allowing you to keep more of your hard-earned money. These fees are a normal cost of doing business—it’s time to treat them that way.

5. By adding extra fees to your invoices, you’re increasing the “pain of paying” for your clients.

The “pain of paying” is a psychological concept that refers to the feeling of discomfort people experience when they have to pay for something. This concept is especially relevant for freelancers since we need to charge clients directly for our services. I talk about this in my free course.

By adding a surcharge or telling clients it will cost more for them to pay via credit card, you’re increasing the pain of paying for them, which can lead to a negative perception of your services. On the other hand, offering clients a smooth, easy, and seamless payment process reduces the pain of paying, leading to a positive experience for the client.

As a freelancer, it's important to make it easy and convenient for your clients to pay you for your services. By providing them with multiple payment options and keeping the payment process quick and painless, you're ensuring that they'll have a positive experience working with you. This can help you retain clients and build strong relationships with them, as they'll be more likely to work with you again.

Additionally, making it easy and fast for your clients to pay means your invoices will be paid on time, and you can keep your business running smoothly.

6. Your rates need to account for these fees in the first place.

When setting your rates as a freelancer, it's important to remember to account for taxes and payment processing fees from the beginning—this is the key part of determining your minimum viable rate. This is why I developed the advanced freelance rate calculator: it helps you factor in fees and taxes from the start, setting yourself up for success.

7. Payment processors like PayPal, Stripe, and Square make it possible for you to be paid quickly and easily, helping to solve cashflow issues.

Payment processors like PayPal, Stripe, and Square offer freelancers a convenient and secure way to receive payments from clients quickly. By having an automated system in place to collect payments, you can make sure your invoices are paid quickly and on time.

With these platforms, you can receive payments the same day you submit an invoice, which provides steady cashflow since you don't have to wait for payments to arrive in the mail. Additionally, these payment platforms are secure and offer an extra layer of protection to you and your clients.

8. Payment processors are a normal part of doing business online.

Since freelance editors and proofreaders don’t have a physical storefront, cash payments aren’t an option. Physical checks are still fairly common when your client is a publisher or company, but accepting checks from individual clients usually means you need to complete the work before you’re paid, which is risky.

Accepting payments through payment processors like PayPal and Stripe is now considered the norm for online businesses. By offering this option to your clients, you’re making it easier and more convenient for them to pay you, which ensures that your invoices are paid on time and your business is able to keep its cash flow steady.

And remember: you’re still free to set a minimum allowable amount for credit card purchases, charge a higher project rate to account for payment processing fees, or ask clients to pay via check if they have a large amount due. Your pricing and rates are 100% in your control. So, why take on the risk and the hassle of trying to avoid payment processing fees?

Instead, be sure that your rates take payment processing fees into account, and take advantage of the deductions available to you when filing your taxes. Then, revel in the security of knowing your business is compliant with all applicable laws and terms of service.