Online Fundraising: The Hidden Costs of Credit Card Donation Fees

In this day and age, every nonprofit organization must accept credit card payments from donors, particularly for online donations. That means virtually every nonprofit out there has a credit card transactions agreement in place with a processing provider.

For many organizations, it's easy to take that initial credit card transactions contract for granted and basically forget about it. But that may be a mistake, as many nonprofits pay higher rates than they need to, meaning less money going to the mission and more money going to payment processing fees.

"Most of the time, the CFO or controller has not revisited the rates on credit card transactions since originally signing a contract," says Vito Pagano, president of merchant services auditing and consulting firm Independent Merchant Group (IMG). "Many times, in 2014, the CFO may not know what has changed, what new programs are out there. The nonprofit could be set up as a retail, for-profit business instead of nonprofit. There's been lots of mergers and acquisitions out there. Lots of things change."

Reviewing these agreements can help save organizations untold amounts of money. Providers such as IMG are out there to help nonprofits unearth any potential savings and get the best rates, ensuring as much money as possible can go to the mission. The objective is not to get nonprofits to switch providers, Pagano says, but to validate that the organization is benefiting from the best possible rates. Oftentimes, an organization outgrows the rates and fees negotiated years prior.

Groups such as IMG also help in privacy and security issues with online donations, as well as optimizing online donation forms and payment.

All of this is contingency-based, meaning it is no cost to the nonprofit unless it realizes savings.

"We are able to go help make wishes come true," Pagano says. "It's all about keeping donations for the mission and not paying excessive fees. … It's a win-win for the nonprofit and for the provider."

This process has proved to reveal significant savings for nonprofits. Take, for instance, Make-A-Wish. Working with IMG, a review of its merchant services statement unveiled rates that did not factor in nonprofit status. In the first year, IMG found savings of about $40,000 for Make-A-Wish on credit card transactions.

Covenant House also found tremendous savings. After reviewing its agreement, IMG helped Covenant house save $25,000 in fees in December and January and $3,000 to $5,000 in savings per month the rest of the year.

Given the potential savings and the buzz around overhead, every organization should review its credit card transactions fees and agreements. You just may find extra savings, meaning more money toward the mission and more donor dollars making an impact.