Nonprofit Card Processing Discounts Can Mean Big Savings

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nonprofit credit card processing
Anyone who runs a nonprofit organization knows how important it is to cut costs at every turn. Funds are limited, as are resources. There are many ways to save money, but one that many not-for-profit organizations don’t think of is reducing their nonprofit credit card processing costs.

Being able to accept donations is the lifeblood of a nonprofit, but the days of cash donations are long past. Credit and debit cards are the preferred method of payment for many people, especially if those cards offer their owners some sort of reward for doing so. Plus, the automated nature of card payments can mean lighter administrative workloads (less time spent opening mail, making trips to the bank to deposit funds, etc), which has a positive effect on any organization’s bottom line.

Not only that, but many of these organizations often require flexible solutions that allow them to collect information about donors and sponsors, as well as payment data — not to mention sell merchandise or set up recurring donations.

Fortunately, if you are a nonprofit organization, you can in some cases lower your credit card processing rates just by asking! (Note: You’ll have to provide proof of your 501(c) status.) If your current processor doesn’t want to offer you a lower rate, you should start looking around at some of the other options. Some of our top-rated processors here at Merchant Maverick are particularly friendly to nonprofits.

But first, some background information.

How Does Credit Card Processing Even Work?

Credit card processing fees can vary quite significantly depending on both the company that does the processing and how the company handles processing. Most companies offer either tiered pricing or interchange-plus (sometimes called cost-plus).

Tiered pricing essentially lumps certain types of transactions into broader groups and charges costs based on which group the payment falls into. Typically, you have a qualified tier with the lowest processing rate, a mid-qualified tier with a slightly higher rate, and a non-qualified tier with the highest rate.

Interchange-plus is a much more transparent option. All card payments are assessed a mandatory “interchange” fee. This includes all the fees paid to the banks and credit card associations. Interchange is non-negotiable; everyone pays interchange fees. The “plus” comes from a markup that your processor charges per transaction. It may be a certain percentage; it may be a percentage plus a flat-rate fee; in some cases, it may even be just a flat-rate fee.

Tiered pricing tells you to pay a flat fee based on the tier grouping. Interchange is included in that cost, and anything above that is the markup. The trouble with this is it’s not always clear which tier a payment will fall into, and you can end up paying more than necessary because of it. With interchange-plus, you always know what you’ll pay based on the card type, so it is often a much better deal.

Here’s where things get complicated:

All the various types of cards are subject to different interchange rates. For example, debit cards have a much lower rate than credit cards. Both Visa and MasterCard offer discounted interchange rates for nonprofits. But commercial and rewards cards, as well as American Express and Discover cards, have a higher interchange rate.

On top of that, if you accept payments online or over the phone instead of in person, you’ll likely pay a higher rate. That’s because online/phone payments are processed as Card Not Present, which possesses a higher risk and therefore higher cost to process.

An additional concern is recurring payments. This is a great way to keep a steady cash flow, but it opens up a can of worms because you need to be sure that a.) the cardholder’s data is stored securely, and b.) the information gets updated in a cardholder’s data changes.

How Do You Get a Nonprofit Discount on Credit Card Processing?

If you already accept cards and want to start saving money, ask your processor about ways to lower your rates. It might be as simple as providing proof of your 501(c) status. In some cases, you may be asked to renew or extend your contract, if you have one.

If you want to maximize your savings, then be sure to ask for interchange-plus pricing while you’re at it.

Before you lock yourself into a new contract, however, you might want to shop around and see what some other processors are offering.

A few merchant service providers specialize in working with nonprofits and charitable organizations, including some of our top-rated processors:

All of these processors offer special discounts for nonprofits, though their suites of services vary somewhat. You can learn more about some of these options in our post detailing the best small business credit card processing options available today. Dharma is high on that list.

What Features Should You Look For in a Processor?

The best choice of nonprofit merchant account or credit card processor really depends on your organization and what features you need. You should look at how your organization raises funds now, as well as any future plans for expansion. Some basic questions to answer include:

Do you want to accept donations online? Make sure your merchant account provider gives you the tools to easily set up a “donate” button on your website.

Do you want to offer honorariums and memorials? If so, you need a customizable checkout option that lets you create fields for that data.

Do you want to accept regular monthly donations? If so, make sure your processor supports recurring billing.

Do you want to accept donations in person? A virtual terminal will come free from many traditional merchant accounts, but for PayPal, it’s an additional $30/monthly. In addition to accepting payments through your computer, this will also enable to you to accept payments over the phone. You may need a USB card swiper to plug into your computer as well.

Do you want to sell merchandise in person? Look for a processor that offers affordable terminals, or the ability to reprogram your existing equipment if you are already doing so. If your team travels a lot or a traditional register setup is too unwieldy, look for a merchant account that offers a mobile payments app. (Or consider using PayPal Here or Square.)

Do you want to sell merchandise online? You’ll need a gateway, which some merchant account providers offer for free, and e-commerce software (not often included with merchant accounts) that is compatible with your gateway.

How do you keep your financial records? If you use QuickBooks, look for a processor that offers QuickBooks integration as a selling point.

Finally, remember that in the online space, credibility is crucial. You need to make sure that your merchant gives you the tools to make your website look professional. (In one regard, this is definitely a major advantage to PayPal, which has pretty much universal recognition.)

Certainly, there’s a lot to consider. If you need help choosing a payments processor, contact us!

Alternatives for Accepting Credit Card Donations

A merchant account isn’t the only way to go about collecting donations via credit card, though it’s certainly the one that puts the power in your hands. It also gives you the most flexibility, because many online donation platforms are exclusively for donations. That means you need to find other ways to accept cards for selling merchandise, etc. You should expect to do a bit more marketing to increase awareness and solicit donations, or pay a bit more for these services as a trade-off.

Capital One runs a giving site where cardholders can make donations. The donations are distributed via Network for good, while Capital One covers the cost of the processing fees.

Network for Good also offers custom tools for you to set up your fundraising. However, it’s worth noting these contracts start at $79/month plus 3% of all transactions. That’s notably higher than you’ll pay with a merchant account; however, the value-added tools provided may offset the cost, especially if you only plan to use it for short-term campaigns.

JustGive.org has one of the most robust donation sites for nonprofits. It even allows people to make gifts on behalf of others, and enables memorial gifts. However, it comes with a rather steep 4.5% processing fee; the company will waive the $0.35 flat fee on donations made directly through your JustGive link. There’s even an option where you can allow the donors to pick up the processing costs. However, it’s not something you can host on your own website.

Amazon Simple Pay is a way for nonprofits to accept donations on their websites. Users can contribute by logging in with their Amazon accounts. This is just an extension of Amazon Payments, focused on nonprofits, so you’ll be paying 2.9% per transaction, which is again a rather steep cost.

Facebook has a pilot program where 501(c)(3) nonprofits can set up donations directly through Facebook, and for now, there are absolutely no costs (but that may well change in time). Still, it can be a useful way to obtain donations if you have an active Facebook page.

PayPal Giving Fund is a less traditional option. While PayPal does have a nonprofit discount, this program delivers 100% of proceeds to the registered charity. The nonprofit organization just needs to sign up; PayPal handles all the administration and users can choose which cause the funds go to. This is not unlike Amazon Smile, where Amazon shoppers can direct a portion of the proceeds from sales to go to the charity of their choice.

American Express and Discover both have giving programs where cardholders can donate to Charity and opt to use their rewards points to cover the transaction cost, ensuring that 100% of the donation goes to the charity.

Ready to Start Saving Money on Card Processing Fees?

If you’re already accepting credit card payments for your nonprofit, it’s time to start checking those monthly statements and see what you are currently paying. (Check out our guide here for more information about fair credit card processing rates and how to accurately compare rates.)

Then, start shopping around. With interchange-plus, you should be able to directly compare processing rates. Be sure to look at the average size of your donation when comparing transaction costs. A flat per-transaction fee is most costly for small transactions than a straight percentage, which is something to consider. Don’t forget to factor in monthly fees, either.

Finally, beware of locking yourself into a long-term contract or one that includes an early termination fee (ETF). Many processors have now moved to month-to-month packages or at least waive your ETFs. Beware of independent sales agents and deal directly with a company when you can. And finally, make sure you get everything in writing.

While a percentage point here or there might sound like pocket change, in the long run, the savings from your lower credit card processing fees can really add up. And money saved on credit card processing fees can be directed to more worthwhile causes.

Got questions about nonprofit credit card processing rates? Leave a comment or contact us directly. We’re happy to help!

Melissa Johnson

Melissa Johnson

Melissa Johnson is an independent writer and editor who loves e-commerce, digital marketing, technology, and social media. Once upon a time, she earned a journalism degree, but she went on to discover that she could work from home, researching, editing, and writing about the things she found most interesting. When she's not tied to her laptop, Melissa can usually be found in the kitchen, reading a book, or doing something of the nerdy persuasion.
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29 Comments

    Kim

    Hi, We’re a small nonprofit providing thherapeutic riding for children and adults with disabilities. We’d like to be able to accept donations via credit card, as well as payments for lessons. Occasionally we might have merchandise, such as t-shirts or cups being sold. Suggestions?

      Jessica Dinsmore

      Hi Kim,

      What a great service you provide! I think Square would handle this well. They work great for most smaller non-profits, for both regular donations, as well as fundraising events, etc. They are also easy to use and have no monthly fee. Good luck to you!

        Gerry

        Hi,

        I’ve read your article and many of your responses to comments. We are a small to medium sized church that has some monthly recurring donations plus a small bookstore that accepts credit card sales. We don’t have a dedicated pad or phone that we can attach a reader to, though there is a computer in the bookstore that can be accessed. You recommend Dharma to several folks who seem to be in situations similar to ours but I read somewhere the Dharma isn’t good for smaller organizations. Is that correct? What would you recommend for us?

        Thank you!

          Jessica Dinsmore

          Hi Gerry,

          I think with your lower sales volume, you’d be best off with Square or Paypal, however you’d really need to invest in an iPad or tablet for either of them. They both accommodate donations quite simply, and offer the flexibility to accept donations on the go. Just be sure to get the EMV reader regardless of your choice. Hope that helps!

            Jason

            Are there any 3rd party processors that allow you to execute all transactions under your domain, seamlessly? I understand I can do this by working with a company like Authorize.net, but that is a complicated set up. I’m looking for a PayPal or a NetworkforGood type service that can do this.

              Jessica Dinsmore

              Hi Jason,

              I’d suggest checking out our eCommerce reviews, and possibly look into Shopify. We aren’t 100% sure if this is the solution to your problem, but at a minimum, they make it pretty seamless to set everything up under one domain. I hope that helps!

                Annie H

                Hi, we are a non-profit preschool based in California, and we’re looking for a way to accept online tuition payments (around $175-$200/month) for around 75 families. That’s our priority, as our parents have been asking for online payments for awhile now. Also, a mobile on site option would be nice, in case parents want to pay tuition at school, or if they want to purchase tickets to some of our events. Any recommendations?

                  Jessica Dinsmore

                  Hi Annie,

                  I think Dharma Merchant Services (see our review) would meet your needs. They are great for non-profits and come highly recommended. I’d also suggest this article: Nonprofit Card Processing Discounts Can Mean Big Savings.

                    Kathi Williams

                    We are looking for something other than PayPal Here for vendor events. PayPal Here does not transfer the address of the donor to the main Pay Pal file causing us to have to enter everyone by hand.

                    Do you know of any POS card companies that have the integration so we can obtain the address of our donor?

                      Jessica Dinsmore

                      Hi Kathi!

                      I love the work you’re doing! I think Square Customer Directory would be perfect for what you are looking for. Check it out and please let me know if you have any further questions. Best of luck!

                        Catherine

                        Great Article, Im not sure if I have more or less questions. I have heard that PayPal has a cap on how much money you can move out of the account per month? If that is true, is there a better option.

                        It is a non profit.

                          Melissa Johnson

                          Hi, Catherine!

                          As far as I am aware, and as far as PayPal indicates on its website, caps only apply to unverified non-profits. Once you link your bank account and provide the other information, you should be free to move money around as you need/

                          https://www.paypal.com/us/webapps/mpp/brc/nonprofits-and-limitations

                          Hope this helps!

                            Elaina

                            We are a looking to accept credit card transactions at various events such as bake sales, and other fundraisers, etc as well as adding a storefront to our website.

                              Jessica Dinsmore

                              Hi Elaina,

                              I think Square would be perfect for you. Check them out and see what you think. Good luck with your sales!

                                Sherry

                                Our camp would like to take online donations where people can use their credit cards. We also have a camp store that we sell out of and have many parents that would like to pay with a credit card. What’s the best option that would allow us to both?

                                  Jessica Dinsmore

                                  Hi Sherry,

                                  Thanks for writing. I would recommend taking a look at Square; they work well for non-profit organizations in our experience. Paypal would also be worth looking into if Square doesn’t check all of your boxes. Best of luck with your camp!

                                    Reema

                                    Hi, I am looking for a cheap option for credit card machines for a non-profit organization. We are currently using moneris which is quite costly for us.
                                    Please advise! Thanks!

                                      Jessica Dinsmore

                                      Hi Reema,
                                      Square is an excellent choice for non-profit organizations and there are no monthly fees or early termination fees.

                                        Kathie Daufel

                                        We are a non-profit organization. We perform once a year and we would like to offer the option of buying tickets at the door using a CC. Looking for the best option for us to do this. Any suggestions would be greatly appreciated. Thank you.

                                          Jessica Dinsmore

                                          Hi Kathie,
                                          Square is a great option for non-profits with low/variable sales volumes.

                                            Lynette

                                            Do any of the merchants have a mobile phone app that accepts recurring donations.?

                                              Jessica Dinsmore

                                              Hi Lynette,

                                              Dharma Merchant Services should be able to help with this!

                                                anne

                                                Hi, Can non-profits charge the fee BACK to the person making the donation?

                                                We were thinking of putting a comment on our website that the processing fee would be covered by the donor. $100 becomes $114.50.

                                                  Chloe Bahal

                                                  Hi Anne,

                                                  That’s a great questions. The laws regarding charging the customer vary between the different card networks, so it is hard to say. This article and this article will help you get a better idea of what you need to do to comply. I hope this helps and if you have further questions please let me know.

                                                    Julie Elangwey

                                                    Hello Melissa, How to reduce credit card processing costs?

                                                      Chloe Bahal

                                                      Hi Julia,

                                                      I think you might find this article helpful. If you have further questions please don’t hesitate to let us know.

                                                        Florence Allbaugh

                                                        Thank you for your work. It was helpful for us. We are a non-profit providing medical & dental care in developing countries.

                                                          Abraham Amoah

                                                          Please I’ve set up a non-profit making organization site at http://www.christiansonearth.org and I want to see how you can help me to set up a merchant account for donations. Please visit http://www.christiansonearth.org/hell.html or /rapture.html to understand what I mean.
                                                          Thank you.
                                                          Abraham Amoah
                                                          Ghana

                                                            Jessica Dinsmore

                                                            Hi Abraham! Thank you for your inquiry. I’d recommend Dharma for your non-profit needs. Best of luck to you!

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