Which Credit Card Processor Is Right for Your Nonprofit?

Whether selling tickets to events on-site, encouraging donors to make additional gifts at a gala or simply enabling gifts by credit card via a website, most nonprofits today will need to use a credit card processor. Which processor you choose can make a big impact on how quickly you receive the funds, how much time your staff will spend getting the system to work correctly and how much you’ll pay for each translation to accept the funds. This review of some of the most popular credit card processors is designed to help you make this decision.

It can be difficult to understand exactly what credit card processing fees you’ll be responsible for, both because there are multiple fees that are not always transparent and because each processor handles them slightly differently.

First, remember that the credit card processor fees are not the only ones you will pay with each transaction. You will also incur card network fees, card issuer fees, interchange fees, the Acquirer Processing Fee, Fixed Acquirer Network Fee, Kilobyte Access Fee, and Network Access and Brand Usage Fee. However, most of these fees are non-negotiable; if you want to accept credit card donations, there isn’t much you can do to avoid them.

Fees paid to the processor vary, and they can be structured as a per-transaction fee, a monthly service fee, a fee associated with the credit card transaction equipment, or some combination. Regardless of how they’re structured, these fees tend to average between 1.5 percent and 3.5 percent for most organizations. As you’re considering which processor to choose, estimate how many contributions or purchases you will likely process in a given year, how many will be online versus in person, and how big they will be. With estimates of these data points, you should be able to estimate the cost of fees your organization will incur.

Though the processor might not tell you, these fees aren’t always set in stone. Before you sign a contract, try to negotiate a better rate. You may be surprised what the processor is willing to offer in order to close the sale. You can also use other strategies to lower fees, such as requiring address verification during transactions to reduce your fees.

Though the basic functionality of each processor is similar, there are key differences that you may want to consider in making your choice:

• Point-of-sale interface: If you want to use your processor in the field to, for example, secure gifts at a gala or run/walk, or to sell tickets to a performance, you’ll be using the point-of-sale (POS) interface, which can be used on either a stand-alone terminal or most smartphones.
• Business tools: Many processors include a suite of business tools that you can use to increase your number of credit card transactions, such as website and online store builders, fraud prevention tools, and inventory managers. Most of these tools are designed more around the needs of businesses than nonprofits, but they do have utility, particularly if you have earned income streams (e.g., ticket or merchandise sales).
• Reporting and analytics: Processors collect and aggregate data on the type, size, and origin of transactions, among other factors, which allow you to make strategic decisions about where and to whom you market. Are you receiving most of your transactions through email? Consider sending more often. Is social media underperforming as a source of donations? Perhaps paying to boost your posts will juice your return there.
• Invoicing: If you’re trying to get more of your donors to give by credit card or your board members are overdue on their annual gifts, consider using a processor’s built-in invoicing function to send an email with a link that they can click to give automatically.
• QR codes: Many processors can now be used to create QR codes, so your donor can snap a picture, make a few taps, and give.

We recommend following these steps as you select a credit card processor:

1. Estimate your transaction type and volume.

Use your available data to estimate how many contributions or purchases you will likely process in a given year, how many will be online versus in person and how big they will be. This data is essential for comparing the processors’ fee structures.

2. Think about the hardware.

Do you plan on getting dedicated hardware for credit card processing, downloading your processor’s app and using your phone as a terminal, or using both? If you’re planning on using your phone, be sure to install the latest updates to your operating system so that your security features are up to date.

3. Catalog your existing systems.

Your credit card processor may be able to seamlessly integrate with your customer relationship management (CRM) software, your accounting software, your website and more. Be sure to understand your existing systems, and to project whether you’ll be changing any of them imminently, before making a decision.

4. Review your options.

Use this buyer guide and the websites of the various processors to understand the functionality and fee structures of the various systems that are available. Reach out to your top choices for a demo and to see if you can negotiate fees.

5. Make a selection and implement it.

Once you make a selection, announce it to your staff and provide them with training to incorporate it into their work. Have a brainstorming session on other places where you could accept credit card donations or make credit card sales.

A well-implemented CRM can have significant benefits for your organization, increasing revenue and simplifying the process of tracking and acknowledging gifts.

• Allows you to accept credit cards: More than 80 percent of Americans have a credit card, and nearly 60 percent of Americans have not written a check in the past month. Without being able to accept credit cards, you are leaving money on the table.
• Manages your donors’ security: Working with the right processor gives you peace of mind that you are attending to security risks and keeping your donors’ data safe.
• Turns any phone into a donation point: Despite some credit card processing myths, it’s quite simple to turn nearly any smartphone into a credit card processor. If your executive director is great in donor meetings, why not give them a way to accept a donation on the spot?
• Automates the acknowledgment and tracking process: If you integrate your credit card processor with your accounting and email software, you can generate thank-you letters and ensure funds are correctly tracked and designated with just a few clicks.