Patreon lets fans fund creators with a regular payment either per month or per video. In addition to funding, Patreon lets creators offer rewards, such as for patrons that pledge $5+, $10+ and so on. For example, some YouTube publishers reward patrons early access to videos that pledge $1 or more per month. One big advantage for patrons is a better chance of being able to interact with YouTube publishers on popular channels. Once a video goes public on a popular YouTube channel, new comments generally end up appearing several pages down. This greatly reduces the chance of the publisher ever reading them.
Patreon has recently hit 1 million active patrons and has over 50,000 active creators on Patreon. They recently made major upgrades with a website redesign and many new features announced. However, despite claiming to give creators 92% of dollars pledged to them by minimising credit card fees, they now charge payment processing fees directly to the patrons on new pledges.
According to their help centre article, new pledges will have a payment processing fee of 5% + $0.30. While this may not seem like a lot for those that make large $10+ pledges per creator, the fee will clearly hike the popular $1 pledge many patrons choose. These new charges do not apply to existing pledges set up before their discrete introduction of the payment processing fee. However, all new pledges will face the payment processing fee addition.
Up until recently, if someone wanted to make let’s say a $1 monthly pledge to a creator, they were billed $1 at the end of each month, plus any tax (e.g. EU VAT). Patreon deducted the payment processing fees based on aggregation of pledges before it reached the creators. Now let’s see what happens if someone tries setting up a new $1 monthly pledge with another creator:
The new bill will be $1 plus 5% and 30 cents each month. This means a new $1 monthly pledge will result in a bill of $1.35 plus any tax. The following example is from a patron in Ireland with a Debit Card:
This fee will apply to each new pledge even though Patreon aggregates the pledges to a single monthly transaction per card. For example, if someone decides to support 10 creators a $1 pledge each, they will face a total bill of $13.50, i.e. 35% fee even with all pledges on a single transaction.
The larger the pledge, the less the impact. For example, a $10 pledge to a single creator will result in a $0.80 fee, adding just 8% to the pledge. As a result, this effectively discourages people from setting up small pledges, which will have a greater impact on creators that depend heavily on $1 to $2 pledges. For example, for fans that would happily pledge $1 to $3 per creator, the accumulation of the fees may deter them supporting as many creators as they would otherwise support previously. Some disgruntled fans pointed this out on Reddit.
The payment processing fee affects credit cards including payments through Stripe and Paypal. As shown above, it also affects debit cards despite banks charging merchants small debit card processing fees.