Patreon Is Changing Their Fee Structure

 

SAY WHAT?!

Yo, I used to work in the credit card industry, so let's talk credit card fees and transaction rates!

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I've kept a close eye on my patreon stats since I started (3) accounts. One of 'em, owned by me, has had a steady 5% fee from patreon, and steady 5.75-6% fee for processing payments.

Patreon is shifting that 5.75-6% processing fee away from me and onto you on December 18th, and setting it at 2.9%+.35 per transaction, which I think is unfair. Here's why:

Transaction fees are a cost of doing business. If you're new to the industry and credit card processing fees, here's a breakdown:
Visa, Mastercard, AmEx, and Discovery all charge merchant service companies (like Paypal, Stripe, Authorize.net, Square, etc etc) a price to allow them to run credit cards and accept the security protocols for those credit card manufacturers. 
Merchant services (Paypal, Stripe, Authorize.net, etc) then work with Merchants (gas stations, retail, restaurants, etc) to install credit card machines and run cards at their place of business. Merchant services charges the merchant to run those cards. Merchants will generally see costs like, ex. 2.9%+$0.35, or 1.9%+$0.25, or 2.0%+$0.0. The list goes on. This price is negotiable if the Merchant argues with the Merchant Services well enough, or gets the right person on the phone.

I cannot TELL YOU how many times I'd get a call from a merchant asking us to lower tranx fees and we'd remove the per transaction $0.35 and lower them to 2.15%.

Merchants sometimes work the cc fees into their product, but you RARELY see a merchant stick the customer with that fee. If we take these classic rules and apply them to patreon, Patreon is the merchant, I am the reseller/merchant(selling goods) and patrons are the customer.

On Patreon, the credit card manufacturers work with merchant service providers like Paypal, Stripe, etc, to allow Patreon to run the cards. Patreon then charged Creators the cost of running those cards, then depositing the funds into the Creators bank. 

In this case, it is up to me to determine the cost of goods sold, the average percentage of fees, and the profit margin I need to make to survive. I've agreed to patreons business model and signed up with their plan, but they've decided that my customers (in this case, patrons) should pay the service fee, even though I'm the merchant/seller of thy goods of ye ol' youtubes.

MERCHANTS CHOOSE WHAT TO CHARGE THEIR CUSTOMERS. Patreon Creators choose what to charge their Patrons Pledge Levels. At least, that's how it SHOULD work. Patreon is choosing to skip over their merchants (Creators) and go directly to the Customer (Patrons) to charge a fee. They're not even allowing Creators the OPTION of how to set the transaction costs.

I should clarify, I consider my patrons as producers and executives of my show. Since they are contributing to my role on the nets, I take their opinions seriously and have respect for the kindness they've shown me.

This is why I'm being upfront about the costs associated, based on my history of expertise on the subject of transaction fees and money handling. Hooray, banking jobs!

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So, from a patron standpoint, you'll be charged more for the same pledge. Those fees I used to pay as the merchant are now being taken directly out of your pledge. So if you pledge $5, you'll actually see $5.50 charged.

Previously, if someone pledged $5 to me, patreon takes 5%, and credit card industry takes ~5-6%. Before the change, my take home pay would be $4.50 or so. That's roughly 10%. Enough for a Starbucks!

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I don't see that extra $.50 you're charged after the change. The credit card industry does. What I do see is a shift of $.25, or a change from 10% to 5% in the monthly fees. So I'd take home $4.75 now. You're being charged .50 so I can take home an extra .25. That means for smaller pledges, the amount you're being surcharged "percentage-wise" does not equal how much more I'll be taking home.

Dear Patreon: [[ see gif ]]

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Now, if you pledge less than $5, it gets complicated.

Remember that .35 transaction fee? That's for EVERY single pledge you make. So if you make 10 separate $1.00 pledges in a month, that's $3.50. Plus $2.90 if we're including the 2.9%. that's 2.9%+0.35 per transaction. So ~$6.40 you'll be charged on top of $10 in pledges.

So you're charged $16.50, for $10 in pledges (each one at $1), and your creator takes home $0.95 (if it's a $1 pledge).

So, if you're a patreon creator with patrons pledging at their max budget, you'll probably see decreased pledge amounts because this is going to hurt your customers. If patrons can afford it, you won't see their pledge change, but more money pledge (but a lower percentage of the total transaction amount) will go to you.

I don't know how this'll affect my (3) different accounts on patreon. I am both a patron and a creator, so I try to go at it from both perspectives. 

Either way, if you're a baller pledger, you will probably want to seriously consider how much in fees you'll be paying per month. I wish patreon gave creators more time to change pledge levels to account for new fees put on their patrons.

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AFAIK, for each card charged via patreon, patreon would pay that fee to processor, and that fee was charged to me as a creator (plus probably an additional amount as profit). So now they're shifting that fee from me to patrons. As a patron, if I pledge $1-5 to many different creators, i usually just see 1 lump sum come out of my cc bill. In the merchant industry, that 1 lump sum is charged the transaction fee once. But in this case, each of those pledges is billed as if it's a separate tranx, even tho my credit card is only charged once. So as a patron I should only pay .35 once, not 10x for one cc tranx.

Merchants (creators) should be considering the fees associated with selling anything (services/art/product) online and work those costs into cost of goods sold. Patreon should keep the existing structure of allowing several microtransactions from one credit card to be paid once at the beginning of the month, to keep transaction fees down. I don't think Patreon really knows all the smaller artists and patrons who really make up the masses of their company.

 

 

Here's what I suggest:

For Patrons:
If you donate $1 pledges to multiple creators and want to flip off Patreon but still support the Creators and the content you love:
Delete your pledges entirely from Patreon, and choose another form of donation. Paypal charges the CREATOR 2.9% plus $0.30 for each transaction, not the person PLEDGING. Paypal also allows you to do reoccuring donations monthly. Of course, Paypal isn't available to everyone and is not a perfect option itself. A patron choosing this would also not get access to the bonus material on Patreon. But it is an option and allows for consistency. 

If you donate $1 pledges to multiple creators and don't want to flip off Patreon but you do have a budget and need to stick to it:
Change your pledges so you continue to support your creators with the lowest possible fee on Patreon. Instead of donating $1 each to ten creators and being charged $0.35 ten times, consider donating $10 to your favorite creator or splitting it between your two or three favs. I currently donate a few bucks to my friends on Patreon - all of their different campaigns. I don't want to play favorites, but if my friends don't have another option for donating, I'll go this route, since I do have a "Pledge Budget" per month.

If you donate lots o' dollars to one Creator:
You'll see a 2.9% + $0.35 transaction fee for that charge. This may or may not be within your budget. If it is, then keep doing what you're doing. If it isn't, then consider lowering your pledge amount or cancel and donate to your Creator in another way.

If you donate lots o' dollars to lots o Creators:
You'll see that transaction fee for EVERY PLEDGE, and that may be outside of your budget. If it is, refer to the above.

For Creators:
Open up other options for Patrons to pledge to you on alternative platforms. Examples: Paypal, Your Personal Website, Amazon Associates / Influencer pages, and more.

Create new pledge levels that include the cost of transaction fees. So if you have a pledge option at $30, create a new pledge level at $28, which will end up being almost $30 after your Patron is charged the $28 plus transaction fee. Offer the same perks as the $30 level. Don't delete the $30 one, in case Patrons want to keep that amount.

Pro Tip Patreon Hack: Hack the per post pledge. Here's the deal - you still want to support a Creator with a "per post" pledge setup (opposite of a per month pledge setup). Instead of contributing to several posts throughout the month, contribute the full amount to the first post of the month, then set a "max pledge" amount in your settings. That way, you're only charged once for the 2.9% and 0.35 fee instead of being charged multiple times on many different posts. You'd get access to a higher pledge level (depending on how the creator sets it up), but also keep costs low. Ex: You pledge $10 per episode to a creator that posts 4 episodes per month. That's $40 monthly, or 4 $10 transactions. With Patreons new structure, that would be ($0.35 * 4) + 2.9%. PS: It's not clear whether the 2.9% is charged on the .35 or before the .35 is included.

https://blog.patreon.com/not-rolling-out-fees-change/

https://blog.patreon.com/updating-patreons-fee-structure/
https://twitter.com/DamienWilkens/status/939608751648198657
https://brianbalfour.com/essays/patreon-onboarding-growth
https://twitter.com/Snubs/status/938664824157831168

Also, shameless plug: https://snubsie.com/support I do stuff on the youtubes.