What it actually costs to accept a $5,000 prepaid block

Prepaid blocks are how most flight schools smooth out cash flow. A student puts $5,000 on account, flies it down over a few months, and the school has the money before the airplane burns a drop of fuel. It is a good arrangement for everyone. It is also, on a card, one of the most expensive ways a small business can be paid.

The arithmetic nobody puts on a pricing page

Card processing is a percentage plus a fixed fee, and the percentage has no ceiling. Stripe’s standard published rate in the United States is 2.9% plus 30 cents per successful charge. That rate does not care whether the charge is twenty dollars or twenty thousand.

The cap is the part that matters. Bank transfer in the United States, which Stripe calls ACH Direct Debit, is 0.8% with a five dollar maximum. Past about $625 the fee simply stops growing. A $10,000 block and a $625 block cost the same five dollars to accept.

At a wet rate around $170 an hour, the difference on a single $5,000 block is roughly $140. That is most of a flight hour, given away on one transaction, for nothing the school receives in return.

What you give up

Time. A card authorises in seconds. A bank transfer takes three to five business days to clear, and until it does the money is real but not yet yours. If a student wants to book Saturday and pays on Thursday, the funds are still moving when they walk out to the airplane.

That is a genuine tradeoff and it is worth being honest about which side of it you are on. A school with comfortable reserves should take the saving. A school where this month’s payroll depends on this week’s deposits probably should not, at least not on every payment.

The reasonable middle is to offer both and let the amount decide. Small charges on a card, where the fee is a rounding error and the speed is worth having. Four-figure prepaid blocks by bank transfer, where the fee stops mattering and nobody is waiting on the money to fly tomorrow.

The failure mode to plan for

A payment that takes days to clear is not a payment that succeeded. It is a payment that has not failed yet. Anything a school builds around bank transfer has to hold that state honestly, which means the invoice cannot show as paid, the student cannot be invited to pay it again, and the balance cannot be spendable until the money lands.

This sounds obvious and it is the single most common way software gets it wrong. A student who pays $5,000, sees no change on their balance, and pays again has just handed over $10,000 against a $5,000 invoice. The system has to refuse the second payment while the first is in flight, and it has to tell them why.

What a school should ask a vendor

• Do payments go to my own payment account, or through yours?
• Do you add a percentage on top of the processor’s fee?
• Is bank transfer offered, and can I switch it off if I need the money sooner?
• What does an invoice look like while a bank transfer is still clearing?
• If a transfer fails after three days, what does the student see, and what do I see?

The last two are the ones that separate software that has actually handled a bank transfer from software that has added it to a feature list.

Where we stand

Path to Sky takes no percentage of what you charge. Payments go directly to your own Stripe account rather than through ours, so the only deduction is the processor’s own fee, and every cent of the saving above stays with you. We charge ten dollars per aircraft per month for the software and nothing else.

Rates quoted here are Stripe’s published United States rates at the time of writing. Check their current pricing before making a decision on it, and read your own processing agreement rather than ours.