The Difference Between Pledge Now, Pay Later and a Recurring Gift
Recently, Cause Vox launched the 2021 Pledge Now, Pay Later Study. It was based upon an online survey amongst 400 American individuals, across a wide range of demographics, including age, education level and income.
As you know, I love studies and statistics, especially pertaining to recurring gifts, so I was intrigued.
Insight No. 1 of the study confirms why I am passionate about recurring gifts: “Donation installments would lead to increased donation size and frequency.”
Sixty-three percent of the survey respondents would give higher amounts and give more often if they could pay in installments. Installment payments are “easy and convenient” as well as “address cash flow issues.”
Insight No. 2 confirms it yet again, especially now during the pandemic: “Donation installments would attract more donors.”
Cause Vox continues to explain how buy now, pay later options are most popular with younger donors, especially those between the age of 22 and 44.
This is all great. It confirms why recurring gifts have become more popular. Of course, for nonprofits, it’s crucial to have the right tools to make it indeed easier for the donors.
I then looked at the Pledge Now, Pay Later platform and here’s where it may get a tad confusing for nonprofits.
You see, pledges have been around for a long time. They’ve always been used as a way for donors to spread out their gift over time.
Donors were usually able to spread them out in larger increments and, often, the organization had to send special reminders to get the donor to pay their pledge.
So, for that purpose Cause Vox's Pledge Now, Pay Later is great. No more reminders to send. The donor can choose the increments they’d like to use — whatever they’re comfortable with.
Recurring gifts have been around for quite a while as well, but they’ve gained more popularity over the past five years.
I would like to emphasize here why it’s important to know the distinction between paying off a pledge over time, versus starting a recurring gift.
A pledge usually has an end date. It’s typically used for specific projects and capital campaigns.
In the Cause Vox dashboard example, the donor wants to make a $2,500 gift. They can choose to spread that out over 12 months or up to 60 months. There is an end date implied here. Once the $2,500 gift is paid off, for increments as little as $41.67 a month, the pledge stops!
A recurring gift typically has no end date.
The donor chooses the recurring gift amount, the frequency (preferably monthly, but quarterly and annually are occasionally used as well). The donor can sometimes choose when they want to start the gift and that sometimes can be in the future.
But unless the donor lets you know they want to stop that recurring gift, it can keep going for well beyond five years.
Finally, to make it even more confusing: A donor can set up a recurring gift from a donor advised fund. This, however, cannot be used to pay off a pledge, but the donor can choose to set an end date.
All three approaches are favorable for the donor. All three allow the donor to spread out a gift over time. All three make it easier for the donor to give.
Your finance or bookkeeper will typically handle pledges differently from recurring gifts. Your system may treat a recurring gift as a pledge without an end date for recording purposes. The terminology can indeed get a bit confusing.
Just remember one thing: It’s all about making it easy for the donor to give in a way that’s comfortable for them. Recurring gifts or Pledge Now, Pay Later will do exactly that.
As a nonprofit, I’d favor recurring gifts because there’s no end date, so donors will keep on giving, especially if it’s done through EFT/ACH/direct debit.
But nobody says you can’t reach out to a donor after their pledge gift stops and ask him or her to continue with a small monthly gift. They’re used to it by then.
If you have great technology now and your (recurring) donations are working, you already have the system in place to handle the donor’s preference, regardless of whether it’s a pledge or a recurring gift.
And if not, this platform may be a good option, or you may have to do some workarounds with your current platform to support bigger pledges that are paid off over a few years. I’d start by taking a look at how many of those pledges you might expect to receive in your organization.
Ultimately, it’s about the donor, and you as the fundraiser will want to offer them the best way to support you. Your cause deserves it.
Erica Waasdorp is one of the leading experts on monthly giving. She is the president of A Direct Solution, a company serving nonprofit organizations with fundraising and direct marketing needs, with a focus on monthly giving and appeals. She authored "Monthly Giving: The Sleeping Giant" and "Monthly Giving Made Easy." She regularly blogs and presents on fundraising, appeals and monthly giving — in person and through webinars. She is happy to answer any questions you may have about this great way of improving retention rates for your donors.
Erica has over 30 years of experience in nonprofits and direct response. She helped the nonprofits she works with raise millions of dollars through monthly giving programs. She is also very actively supports organizations with annual fund planning and execution, ranging from copywriting, creative, lists, print and mail execution.
When she’s not working or writing, Erica can be found on the golf course (she’s a straight shooter) or quietly reading a book. And if there’s an event with a live band, she and her husband, Patrick, can be found on the dance floor. She also loves watching British drama on PBS. Erica and Patrick have two step sons and a cat, Mientje.