5 Things Nonprofits Should Know About Credit

We Accept Credit Cards

Any nonprofit organization is familiar with the process of accepting donations. However, you may not be familiar with the options for accepting donations via credit card. It is important to learn about your credit card options and choose one that is a good fit for your particular organization. In this day and age, many people prefer to use their credit cards for the majority of their financial transactions. Accepting credit cards enables you to get the donations that you need to keep your organization going. The following list includes 5 things nonprofits should know about credit.

The importance of accepting credit card donations

Accepting credit card donations significantly increases the number of people who will be willing and able to donate to your nonprofit. Donors enjoy the perks and convenience of paying with a credit card. In turn, nonprofits get the benefits that come with collecting funds quickly and easily.

The types of fees

One reason that nonprofit organizations put off the implementation of a credit card donation system is because of the confusing fees. It can be tough to get your head around all of these different fees and determine whether or not they are appropriate for your specific organization. The following list includes the most common types of credit card fees.

  • Merchant account fees. A merchant is any individual or company that processes credit card transactions. As such, a processing account is often referred to as a merchant account. All payments are made through this financial account.
  • One-time fees. Most merchant accounts come with some sort of initial setup fee. This fee may be referred to as a gateway setup or application fee. Some companies also require payment for the software or other equipment that is used for the transaction processing. Are you using a web-based system or are you leasing your equipment? If so, you may have a monthly fee instead of a one-time fee for the system or equipment.
  • Monthly account fee. Virtually every merchant account comes with a monthly fee. This fee may be referred to as an account, statement, or reports fee. Typically, monthly charges are in the range of $10 to $30. In addition to monthly fees, some accounts also require a monthly minimum fee.

The transaction fees and discount rate

Each transaction often has two processing costs that are as follows:

  • Item fee. Generally this fee is in the range of $0.20 and $0.50.
  • Transaction percentage. This fee is referred to as a “discount rate.”

Discount rates vary significantly for different processors. Typically, they are in the range of two to four percent. The type of credit card and processing method both play a role in the discount rate. The majority of the discount fee goes to the credit card issuing company (i.e. Visa, Discover).

The difficulty of comparing cards and services

It can be very hard, if not impossible, to compare fees for varying companies because most of them do not present their fees in a simple format. For example, sometimes discount rates are broken down into the interchange fee and the charge for the organization managing the various transactions.

Additional factors that can affect the transaction fee include the following:

  • The type of card that is used (i.e. credit card vs. a debit card)
  • The processing method for the transaction (i.e. keyed in vs. swiped)
  • Fraud prevention tests (i.e. is the same address used for both the credit card billing address and the particular transaction?)
  • The associated risk of the transaction (i.e. most companies believe that transactions completed without a physical card swipe are more risky)

The credit card processing alternatives for nonprofits

As you reach the end of this list, you may be wondering about credit card processing alternatives available for nonprofits. There are a number of online options available, including the following.

  • Complex fundraising programs. If you have a sophisticated initiative in the works, you’ll want to check out The Raiser’s Edge and DonorPerfect. They provide specialized nonprofit services for documenting and tracking all fundraising campaigns and other undertakings.
  • Donation processing sites. These sites do not have set-up fees, and their fee structures are simple to understand. Donation processing sites come with pros and cons. Your particular fundraising objectives, the size of your organization, and your available resources all play a role in determining whether one of these sites is a good option for you. Regardless of the site you choose, it is important to get your branding across for credit card donors and maintain the ability to connect with them directly for future campaigns and initiatives.

The process of choosing a credit card payment system is not easy or simple. It is important to explore all of your options and get input from fellow nonprofit executives before you make a final decision.