Non-Profit Merchant Accounts

If you run or work at a nonprofit organization you know how important it is to cut expenses and manage costs very carefully. There are many ways to save money and one manner in which you might wish to take into consideration is to decrease your payment processing expenses.

Why do Non-Profit Organizations need to accept donations via Credit Card?

Accepting donations is the life of a nonprofit. Credit cards, debit cards, PayPal, Venmo and etc. are popular methods for payments for many people.

Let’s face it. Credit cards are handy and easy for people to use. Your chances of getting donations could be higher when you offer credit cards.

Credit card payments can mean less work for the non-profit. You may be able to partner with the credit card company or bank that issued the credit card to your donor. There is likely some form of cooperation you can achieve when the bank or credit card company knows that their customers are also your donors.

If you are a nonprofit company, you can sometimes reduce your credit card processing rates just by asking your payment processor. You will have to show proof of your 501( c) status but that’s easy to do.

Let us explain below.

What are Credit Card costs I should know?

Tiered pricing groups transactions into charges and chunks costs based on which chunk the payment falls into. Typically, you have a qualified tier with the cheapest processing rate, a mid-qualified tier with a slightly higher rate, and a non-qualified tier with the most expensive rate.

Interchange-plus is easier to comprehend. All card payments are assessed an “interchange” fee. These are costs paid to the banks that issue credit cards to your customers and the fees paid to the credit card companies. Look in our diagram and you’ll see the parties involved in a credit card transaction. You’ll see your customer, you the merchant, bank processor (payment gateway, merchant account provider, payment processor) and then the credit card network followed by the bank. Interchange fees are set and are usually non-negotiable and these costs are paid to the bank who issued the credit card to your customer and to the credit card network. The “plus” is the markup that your payment provider charges for each transaction. It may be a percentage, a percentage plus a flat-rate fee or just a flat-rate fee. Something like 3%, 3% + $0.05, or just $0.10.

How Do You Get a Nonprofit Discount on Payment Processing?

Ask your processor about ways to lower your rates if you already accept cards. Tell them that you’re a 501( c) organization and show your documentation that proofs your status. In some cases, you may be asked to renew or extend your contract from its current term to 2 or 3 years. You don’t need to agree to this but it is something that you’ll want to consider.

To maximize your savings, be sure to ask for interchange-plus pricing.

Before you do a new contract, however, you might want to shop around. This is a competitive business so it’s good to see what other processors are offering.

A few merchant service providers work with nonprofits including the processors below:

All of these processors offer discounts for nonprofits.

What Features Should You Look For?

Before you pick a payment processor you need to think through the things that you need for your non-profit.

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

Do you offer memorials and honorariums where your donors can donate in the name of someone else? If so, you need a checkout option that lets you create fields for that data.

Do you accept monthly or annual donations? If so, make sure your payment processor offers recurring billing.

Do you accept donations face to face? A virtual terminal will come free from many traditional merchant accounts. This allows you to accept payments through your computer and enable to you to accept payments over the phone. You may need a USB card swiper to plug into your computer.

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

Do you sell products online? If so, you’ll need a payment gateway and e-commerce software that is compatible with your gateway and your website. There are many options here. Some ecommerce software is free and popular. Magento is a very robust and free software and it’s one of our favorites but it’s not for everybody. You may want to go with an all-in-one solution that handles all the ecommerce, web hosting and payment processing for you. A couple of these solutions are Shopify and Volusion.

How do you keep your financial record keeping? If you use QuickBooks, look for a processor that offers QuickBooks integration.

Are You Ready to Start Saving Money on Payment Processing Fees?

It’s time to start checking those monthly statements and see what your costs are if you’re already accepting credit card payments.

Shop around. With interchange-plus, you can contrast processing rates among payment providers. Be sure to look at the average size of your donation when comparing transaction costs. A flat per-transaction fee is expensive for small transactions. A percentage fee can get expensive when your donation size is a larger amount. Another thing to remember is to watch out for monthly fees and try to avoid them.

Beware of putting yourself into a long-term contract or one that includes an early termination fee. It’s a good practice to get all negotiations you do with a prospective payment processor in writing.

Credit cards, debit cards, PayPal, Venmo and etc. are popular methods for payments for many people. Your chances of getting donations could be higher when you offer credit cards.

Credit card payments can mean less work for the non-profit. You may be able to partner with the credit card company or bank that issued the credit card to your donor. You’ll see your customer, you the merchant, bank processor (payment gateway, merchant account provider, payment processor) and then the credit card network followed by the bank.