In this step-by-step guide, I'll show you everything you need to know about setting up online payments for your nonprofit.
Setting up an online payment processing system is relatively simple, plus, it can make your life a lot easier. No more collecting money in the mail, cash at the door, or running checks to the bank. Instead, you can accept payments online via your website for everything, like:
- Membership fees
- Member dues and automatic recurring payments
- Event fees
- Donations and major gifts
- All other purchases
If you’d like to start accepting online payments right away, you have two main options to get started.
Two Options to Accept Payments on Your Website
The two options to accept online payments are through a Merchant Account, or a Third Party Payment Processor.
To know which one is right for you, determine the volume of monthly online transactions you expect.
1) Merchant Account
For nonprofits with a very high volume of monthly transactions (hundreds or more), choose a Merchant Account.
- Typical Fees: 2.15% + $0.25 per transaction. Setup/monthly fees variant
- If you plan on accepting offline payments and donations via credit cards, you will need a merchant account to use a hand-held credit card reader.
While transaction fees for a Merchant Account are typically lower than a Third Party Payment Processor, considerable time and effort needs to be put in up front to setup your account. I will go into the details of this in the next section.
2) Third Party Payment Processor
For nonprofits expecting a low volume of monthly transactions (less than a hundred), choose a Third Party Payment Processor.
- Typical Fees: 2.9% + $0.30 per transaction. Usually no other fees.
Setting up a third-party payment system can be done in a matter of minutes, but transaction fees are higher, because you’re paying a third party to process the transactions via their own Merchant Account. This is the preferred option for the majority of small nonprofits I’ve come across, as they don’t have the bandwidth to setup or maintain a merchant account or payment gateway.
To help you understand more about which option may be right for your nonprofit, I’ve detailed them both below.
Merchant Account: 3 Steps to Get Started
1) Setup a Merchant Account
A Merchant Account allows your organization to directly accept debit and credit card payments whether they are online or not.
Here is a list of 57 different Merchant Account providers. To setup your Merchant Account, you have two options:
- You can do it yourself by contacting a Merchant Account provider and coordinating with your financial institution. As PaySimple points out, “If you are a smaller business, you will also be required to provide personal information, undergo a credit check and provide a personal guarantee on the account. This process can feel cumbersome, so it’s helpful to work with a provider that will hold your hand through underwriting to ensure the fastest and least confusing approval process.”
- Get an Independant Sales Provider to do it for you. This option is obviously the easiest.
2) Setup a Payment Gateway
A Payment Gateway allows credit card information to be entered directly into a form on your site.
There are a number of such providers, like Authorize.net or PayPal Pro. A good provider should screen orders for fraud, and also calculate taxes into the final bill automatically.
To integrate the gateway on your website, you may need the help of a web developer depending on your expertise.
3) Add a Link to Your Payment Gateway
The link or button is the easy part — most online payment processors will supply copy-and-paste code for buttons to put on your website (like this example from PayPal), or a link to include in your emails and other communications.
If you are willing to put in the effort up front, going with this option may be optimal for your nonprofit in the long run as the processing fees can be lower than Third Party Providers.
Third Party Payment Processor: 2 Steps to Get Started
Step 1) Select a Third Party Payment Processor
This sort of service is generally the quickest and easiest way to set up your organization to collect donations and other payments through your website.
Be aware that not all payment processors do business in all parts of the world, or there may be extra hoops to jump through for users outside North America (and sometimes for those outside of the United States).
After you read the next step, I’ve provided a list of considerations and payment processor options.
Step 2) Add a link to your payment processor
Once you sign up for a Third Party Payment Processor, the provider will give you a link and embed code for a “Donate” or “Pay Now” button, which can go on your website. When a payment is made, the payer automatically get a receipt by email, and you’ll get an email to notify you of the payment also. Then you can choose to withdraw the funds into your bank account, or keep them in your account with the payment processor.
3 Considerations Before You Choose a Third Party Payment Processor
Since this is the option I recommend for most nonprofits, I’m going to take some extra time to go through the considerations to make sure you choose the best provider for your organization. Here are three common considerations I see before an organizations chooses a provider:
- Ease of Use
Just as a “brand name” product can engender trust in a consumer, compared to a product they’ve never heard of, a payment processor that’s familiar to your supporters is likely to give them greater confidence in making online payments.
When you think of buying and selling online, which services come to mind as having a solid reputation?
If you’re not sure what payment processor your supporters would feel most comfortable using, you can conduct a quick poll on your website or ask around at your next general meeting to get a sense of their habits and preferences.
Ease of Use
Ease of use is a huge factor — if the payment process is a big hassle for you to set up and manage, there may be an investment in time and/or tech support that’s more than you can manage right now.
Further, a membership payment or donation may be abandoned before it’s completed if the process is not quick, simple, and relatively painless from the online donor’s perspective. Users will be quick to abandon a payment if they are uncertain about what they’re doing, for fear of making a costly mistake.
If accepting online donations is your main goal, you may want to take a quick glimpse at our guide on how to turn your website into a donation generation machine in just six steps to make sure you’re setup appropriately.
Reading the fine print, talking to a support agent, and calculating some simple math may save you money in the long run.
In a TechSoup discussion of online payment processors, one nonprofit reported paying more than $100 in transaction fees for an event that brought in only $2000 — obviously a significant cost.
However, another nonprofit group, Sacramento Loaves & Fishes, found a clever way to share the costs of their payment provider — they added a custom field to their donation page, giving supporters a chance to choose to pay the processing fees on their donations. This may require a greater level of technical expertise than is available to many small nonprofits on a tight budget, but it’s an interesting approach that may be worth looking into.
What works best for one organization may not work as well for another, but here’s a look at a few online payment processing services, to give you a sense of what’s out there.
List of Third Party Providers
Here I’ve listed several of the payment processors I’m familiar with and are commonly used by customers of Wild Apricot. They are in alphabetical order.
- Transaction fees: 2.9% +$0.30
- Setup fee: $45
- Monthly gateway fee: $25
- Transaction fees: 2.90% + $0.30
- Transaction fees: 2.90% + $0.30
- Charity 501(c)(3) discounted fees: 2.20% + $0.30
- Annual account fee: $39.95
- Transaction fees: 3.25% + $0.35
- Fundraising discounted fees: 1.99%
To qualify for fundraising discounted fees, a Tax ID and Nonprofit Designation Form must be emailed to ProPay. See here for more details.
- Transaction fees: 2.9% + $0.30
Square also offers an easy to install app and card reader for in-person transactions. Simply plug the card reader into your phone and accept credit card payments at events.
- Transaction fees: 2.9% + $0.30
- Email firstname.lastname@example.org for information about nonprofit discounts.
Bonus: Google Wallet
This is an alternate option that may work for your nonprofit. With Google Wallet, you can send and request money for free (app available for Android or iTunes) using just someone’s email address.
How to Automate Monthly Payments
If you’re a membership-based organization looking to automate monthly renewals, you will need more than a merchant account, or a third party payment processor. You will need another type of software which integrates with your payment processor and that allows recurring fees to be automated.
The easiest way to setup recurring payments is to use a membership management software like Wild Apricot, which also integrates with whichever payment system you’re using.
Once set up, members can opt to have their monthly or yearly fees automatically billed to their credit cards, meaning you won’t have to hound them for payments, or late dues. It can be a huge time-saver for any nonprofit.
In fact, here’s the story about how one membership manager was able to save 20 hours of administrative tasks per week (including setting up automatic recurring dues) by using membership management software.
And if you're looking to learn more about how a membership management system can help you create recurring payments and grow your members, I'd encourage you to sign up for our free nonprofit webinar, called The Tech Effect: The Simple Solution 1000's of Organizations Are Using to Grow Membership in Today's World.
Additional Nonprofit Online Payment Processing
Editor's Note: This post was originally published in February 2009 and has been updated for accuracy and comprehensiveness.