Online fundraising is a great addition to your non-profit organization strategy. Getting started can be a headache at best and a nightmare of hidden fees and confusing terminology at worst. Let’s dive into the basics of online fundraising to turn that headache into a head start!
Online fundraising, digital giving, or shopping carts mean accepting money online. This is done through credit card transactions and eCheck ACH / Bank Account Transfers. These are online and done electronically.
Accepting Credit Card Donations Online
Accepting credit cards requires several pieces:
- A valid bank account
- A merchant account through a payment processor
- A gateway account through a payment gateway (often included with the processor)
- A website platform, mobile app or other means to gather credit card and donation information
Many vendors provide some or all of these services, for example:
|Payment Processor||Platform Fees / Transaction or Month||Credit Card Fees/ Transaction||Static Fees/Month||One-Time Set up Fees|
|PayPal||N/A||2.9% + $.30||$10||$0.00|
|DonorZen||$0.00||3.39% flat rate||$0.00||$0.00|
(Don’t see your vendor – contact us at email@example.com and we will tell you what we have uncovered)
Understanding Costs of Online Donations
Let’s look at the types of fees you may be charged.
Transaction fees per donation. This fee is a percentage of the donation and may include an additional charge of between 5 to 30 cents per transaction. For example, if your fee is for 4% plus $0.15 / transaction, this means that for a $100 donation, you are charged $4.15, giving you $95.85.
Caution! These different vendor fees pile on top of each other, leading to higher costs than initially evident!. Once you start researching, you will see the various components that go into increasing the total cost.
*For example from the chart, GoFundMe charges 5%, but to cover PayPal fees the total rate is 7.9% + $.30 for each sale. In the example of a $100 donation, through GoFundMe, you get $91.80 after fees.
Monthly or one-time setup fees. These charges, also known as static fees, are paid whether you receive donations or not. One-time setup costs can be as high as $800 and monthly expenses as high as $2,500 are possible.
Understanding fees is a challenge. Unravelling the confusion around the various fees vendors charge to process your donation is critical. Otherwise, these fees erode the amount your donors give and undermine the confidence in non-profits ability to reach their goals. The good news is that armed with this knowledge you can make new choices. Always check the fine print and ask for a list of all costs in writing before engaging with a service provider.
Different vendors have different settlement schedules. These schedules state when money is transferred to your bank account. Schedules vary, sometimes significantly. For example, PayPal takes 3–5 business days and Facebook can take up to two weeks. Check the schedules carefully and ask questions making sure you understand the various providers’ policies around payments.
Reconcile Bank Statements
Regulations require non-profits to account for all donations.
Vendors make this a difficult and time-consuming process because they don’t include donation information in the bank account settlement statements. Without information, non-profits must review each transaction, calculating amounts, and verifying dates ensuring all donations are validated.
PCI is the regulatory body that oversees credit card processing. PCI Compliant confirms that vendors meet or exceed the stringent requirements to securely store and process credit card information. PCI levies massive fees against companies that fail to protect and secure user’s payment information.
When choosing a service provider, verify that they have embedded forms, hosted payment pages, or checkout integrations to accept donations. These activities confirm that credit card information is secure and leaves the burden of PCI compliance with the vendor.
Online giving opens up a world of opportunity for your non-profit. Look for these features while selecting a partner provider:
- recurring donations,
- donor management,
- eCheck giving,
- and reconciliation tools.
Ask about additional fees that may come with these features.
We hope you found this article useful as you discern your online fundraising efforts! Please share this with others who may find it useful.
Organizations of all sizes have used DonorZen to collect credit card donations online, collectively raising over 28 million dollars through out platforms. Get peace of mind knowing that you only pay a single fee and you can meet your audit and reconciliation requirements easily through DonorZen!