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Since I'm familiar with Square Email Invoice Pricing, I will use that service in my following calculation examples.

Square charges a fee of 2.9% on the invoice total plus 30 cents per invoice (as of October 2019). This is the cost for either email invoice or taking payments through Houfy using Square integration.

The cost to you can vary by the number of invoices you accept payment on: 

Net: The more invoices issued and then paid through Square, means a slightly higher cost by fractions of a dollar to you.

Note: If you issue an invoice through Square, but payment is received outside of Square, you can mark the invoice paid with a notation of how that payment was made. Square will not charge you a fee on the invoice if they did not actually collect the payment.

The invoice to your guest includes not only your rental fee, which could vary by the rental period, but also additional static or variable fees you charge (cleaning fee, additional guest fees, security/damage deposit etc), plus the taxes you collect for all taxing authorities on all the taxable items on your invoice (local, state, tourist, etc.). 

Consider that not all these charges are for money going into your pocket. The cleaning fee may be the exact charge your cleaner charges. Many of the items on the invoice are taxable in most jurisdictions. 

Net: You're paying the 2.9% Credit Card Fee on everything on your invoice including charges that aren't yours. 

This is where Algebra education will come in handy! Let me define some values and variables and develop formulas to calculate the true credit card cost.

Let's set the variable X to be the rental fee you plan to charge. This could include variable fees that you charge such as extra guest fee. The thing to understand about X is that this is money coming to you.  This variable X is taxable.

Let's say that you require a $250 deposit for every reservation. It's a static cost that you will be charging. Per your tax jurisdiction, this is NOT a taxable item.  This is also money going to you with the intention of refunding to the guest after their stay. 

You also collect an $80 cleaning fee per reservation. This fee is taxable and you are required to collect the tax on this fee. 

In this example, I will keep the taxing requirement easy. Let's say the tax rate is 9%. This rate will be written as .09 in our mathematical formulas.

The Square credit card fee is 2.9% and will be expressed as .029 in our formulas.

These are the items that will be included on the invoice to the guest:


When calculating your specific formula, it might be easiest to start as I've shown above, using words to list all items that will be included in the invoice.

Using Algebra, the formula looks like this (remember X is the variable associated with your rental fee from this guest.)

For a rental rate of $1000, this invoice to guest would be $1,427.20

The total is then charged 2.9% by Square, shown in the next formula, where I've also grouped values from our invoice values above and also added the 30 cents that Square collects per invoice payment received.

Using Algebra, let's adjust this formula so it's easier to work with:

This Square Fee formula takes into account the 9% tax on the rental fee as well. ex. As X, the rental fee increases, X is still multiplied by 1.09 (rent + tax) and the .029 Square fee.

Let's say the rental fee to our guests is $1000. Using our established formulas that include deposit and cleaning fee:

Tax on rental rate paid by guest:  $90.00

Your true take rate on the rental is actually $1000 - $41.69 = $958.31

Adjusting Your Rental Fee for Credit Card Fee Recovery

If you'd like to adjust your rental rate to cover this credit card fee, increasing the fee by $41.69 will not do that!  This is because all prices on your invoice will be charged the same 2.9% fee. This would mean you would pay 2.9% fee on the $41.69 too, thereby collecting less than $41.69 from Square!

On top of that, when you charge a higher rental fee to recover this Square processing fee, you'll also have to collect more tax on the rental fee increasing the Square processing fee further than just the rental fee increase.

Let's figure out Rental Fee that Covers the Square Charge

If we didn't have fees, we've already determined that our invoice to guest including deposit, cleaning and taxes would be $1,427.20. So let's work towards receiving that amount....or really an amount close to this number. Keep reading to understand this....

We've already determined that our fixed costs including tax on cleaning fee totals $337.20. We also know that the Square fee is .029 times the total of rent + tax and these fixed costs.

Our formula that takes into account the Square Fee should result in a total received by us as $1,427.20. This total assumes we're collecting $90 in rental tax. But we know that with a higher rent, our tax will also be higher. We'll have to receive not only the $90 on the first $1,000 of rent collected, we need to receive 9% tax on the new rent amount over this first $1,000. Therefore, our new invoice must not only total $1427.20, but also include the 9% tax on the new rent over $1,000.

Here's our new formula and the steps to solve for New Rent:

We would have to charge $1,043.05 to our guest to recover $1,000 after Square fees.

Rent is $1043.05.  Tax on rent is $93.87.  Our fixed cost including taxes remains at $337.20 for a total invoice to out guest in the amount of $1,474.12.  The Square fee is .029 * $1,474.12 + .30 = $43.05. 

Subtracting the new Square fee of $43.05 from the new rent of $1,043.05, we get $1,000.00, our intended take-rate for rent.

This fee is 4.1% of your new rental rate ($43.05/$1,043.05) and 4.3% of your desired rental take ($43.05/$1,000). 

Let's Calculate Rent When You Want $1,500 Income

Using the same fixed fees as in our earlier example, the total including related 9% tax is still $337.20. If our goal is to take in $1,500, then our the desired amount from the guest is:

Let's figure out New Rent to charge in order to recover $1,972.20 + the additional new tax over the first $1,500 in rent.

 New Rent plus 9% tax is $1,699.71. Fixed costs are still $337.20 for a total invoice of $2,036.91. The Square Fee on this amount is $59.37. Subtracting the Square Fee from the new rent, we receive $1,500.

In this example, the Square Fee as a fraction of the new rent is 3.8% ($59.37/$1,559.37).  As a fraction of our intended rental income of $1,500, the Square Fee is 4.0% ($59.37/$1,500). 

 Additional Tax Required on this New Rent which isn't included in the value in Step 1

Assuming that there is a single tax rate that applies to all taxable items, just plug in your desired rental take into this formula along with the total non-taxable items, the total taxable items and the tax rate (ex. 9% is written as .09 in the formula) to determine the rate you need to charge to recover your Square fees. This formula assumes just one invoice.

Suggestions on Recovering Credit Card Fees

Rather than accept the Square fee as an expense and reduce your overall income, you might want to charge the guest to recover fees associated with credit card processing. Know that it is illegal in some places to charge a fee explicitly for recovery of this cost. You can increase your rental rate to ensure your income covers this cost. After making these rental fee adjustments, you could offer cash discounts (if allowed in your jurisdiction) ensuring that your net take is the same regardless of payment method.

Personally, I get a little disgruntled when I get an invoice that includes a fee designated as related to my payment by credit card. I would rather that cost be buried in the price of whatever it is I'm purchasing. For that reason and based on these examples where we assume that most reservations are for the $1000 rental fee and a single invoice, I would suggest increasing the rental fee by at least 4.3%.  So instead of $1000 rental fee or the $1,043.05 calculated to return $1,000 income, charge the guest $1,050.  If most reservations are in the $1,500 range, I would increase the rental fee by 4.0%.  Please remember that my examples incorporated a specific tax rate and specific fees that influenced this percentage increase required.

Understanding Credit Card Costs

In order to recover your credit card costs in your rental pricing, you need to understand the true cost of accepting credit cards.  In this story, I'll explain how to determine the true cost of the credit card fee relative to your rental rate and how to set your rental rate at a value that will allow you to receive the rental take-rate you desire to cover these credit card costs.

Understanding Credit Card Costs

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