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Nonprofit Credit Card Processing: Everything You Need to Know

Tatiana Morand 28 November 2019 21 comments

Non profit credit card processing

Aisha sighed.

She had been charged with finding a way to increase donations for her local theatre’s upcoming gala, and was quickly becoming frustrated by how resistant many of her coworkers were to the idea of processing credit cards.

They were used to collecting payments at the door and asking for donations with envelopes at the table, and didn’t see why that needed to change.

However, she was quickly becoming convinced that setting up a payment processing system was relatively simple, and could also make her life a lot easier. 

She’d be cutting out collecting money in the mail, cash at the door, or running checks to the bank — meaning that she’d have a lot more time to focus on fundraising. 

And if she heard one more person say, “It’s the 21th century! How come you don’t accept donations through your website yet?” she was going to lose it. 

All she needed was a way to convince everyone else…

Being able to accept credit cards, both online and in-person, can make it easier for your nonprofit to collect:  

  • Membership fees
  • Member dues and automatic recurring payments

  • Event fees

  • Donations and major gifts

  • Online store purchases

If you’re trying to implement credit card payments at your nonprofit like Aisha, or want to get more information, this post is for you

We’re going to discuss everything you need to know about credit card processing for nonprofits, including: 

  1. The Three Main Credit Card Processing Options for Nonprofits 

  2. How to Set Up A Third-Party Processor

  3. How to Set Up a Merchant Account

  4. How to Choose a Credit Card Processor that Works for You

  5. Nonprofit Credit Card Processing: A Few FAQs  

So, if you want to learn more about nonprofit payment processing options, read on!  

The Three Main Credit Card Processing Options for Nonprofits

The three main options to accept credit card payments for nonprofits are through a third party payment processor, a merchant account, or software that also processes payments. I’ve outlined what you can expect from each of them below. 

1. Third Party Payment Processor

  • Typical Fees: 2.9% + $0.30 per transaction. Usually no other fees.

  • Customers may recognize the name if you use a widely accepted payment processor, but there are fewer opportunities to brand it with your identity. 

If your nonprofit is expecting a low volume of monthly transactions (less than a hundred), you might want to choose a third-party payment processor.

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 rather than having your own. 

It’s also not possible to accept credit card payments in person if you choose this option. You’d have to use another tool such as Dipjar to collect donations at an event, or stick with cash.

2. Merchant Account

  • Typical Fees: 2.15% + $0.25 per transaction. Set up/monthly fees vary. 

  • 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. 
  • There are more options to brand your donations. 

For organizations with a very high volume of monthly transactions (hundreds or more), it might be easier to choose a merchant account. While transaction fees for a Merchant Account are typically lower than a Third Party Payment Processor, it takes a little more time to set up your account.  I will go into the details of this in the next section.

Credit Card Terminals vs. Credit Card Swipers vs. Virtual Terminals 

If you want to take credit cards at events like Aisha, you’ll also need to look into getting hardware like a credit card terminal or a credit card swiper, or entering payments in manually via a virtual terminal.

I’ve included these options in this section because if you’re planning on doing that, you’ll probably need a merchant account. 

Once you’ve set it up, you can work with the payment processing company to get the appropriate hardware to process in-person credit card payments. 

The three options I’ve mentioned above are the most common because they involve the least manual work. I’ll quickly run through them now so that you know which type of credit card processor is most likely to work for you. 

Credit Card Terminals

First off, credit card terminals. A credit card terminal is the same kind of technology you’ll be used to using at most retail stores: a simple card reader that customers can insert, swipe, or tap their card against to pay. 

You can purchase models that are wired or wireless – the advantage of the first being that it’s much more likely to remain connected even in the case of an internet outage, and of the second that it’s much lighter and more portable. 

However, both kinds can be more difficult to connect to other software providers, such as fundraising software, and are more expensive than a card swiper. 

Credit Card Swiper

With that in mind, you may want to consider using a credit card swiper. These lightweight devices are gaining in popularity because they can easily be attached to a phone or tablet. Simply download the app associated with your payment processor, purchase a card swiper from them, and you’re good to go! 

Although consumers may once have looked suspiciously on this kind of technology, it’s familiar enough now that they’ll recognize it from other events (or even their local coffee shop). Many common nonprofit payment providers, such as Square or WAPay, allow you to do this with ease. 

Virtual Terminal

Finally, if you don’t mind entering credit card numbers manually, you can also simply use a virtual terminal. This is basically the same as the donation page a customer would see on your website — it allows you to enter credit card details into a form and then charge them online. 

The disadvantage of this kind of terminal, though, is that if you need to process a lot of transactions, it’s much more time-consuming. Some customers may also not feel comfortable letting someone else type in their CVV and credit card number. 

3. Credit Card Processing Through Software

If you’re looking for a more robust solution, or want to overhaul more than just your payment options, there are software tools that include a variety of other features but will also allow you to take payments.

Some of these options are fundraising software, which include functionality like donor management and peer-to-peer fundraising. Others are all-in-one solutions, which also feature other tools that nonprofits might need such as a website builder, online store, and event registration. 

  • Fees will vary based on the software you select. Payment processing fees will be comparable to those for a merchant account. 
  • If the payment processing is done through another software tool, you will likely be required to set up a merchant account and face the same advantages. 

One example of all-in-one software is Wild Apricot. If you’re looking for an option that includes a website builder, online store, event registration, and more, you can check out our free trial to see if it’s right for your organization.

Some of the benefits to using Wild Apricot Payments over another provider are: 

  1. We offer free support for Wild Apricot Payments as well as the rest of our platform.
  2. Your members and customers will not be directed to another site for online payments. They will stay on your Wild Apricot website
  3. We do not charge any set up or monthly fees.
  4. Payments are directly transferred to your bank account within 48 hours.
  5. Recurring payments (aka scheduled payments) are supported, as are mobile payments through your Wild Apricot app.

Free Trial Wild Apricot

To help you understand more about which option may be right for your nonprofit, I’ve detailed how to set up a merchant account as well as how to set up a third-party payment processor below. 

Note that I haven’t gone into detail about how to set up other types of software, since the process will depend on which one you choose, but it’s likely to be similar to setting up a merchant account. 

Third Party Payment Processor: 2 Steps to Get Started

third party payment processor

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). 

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.

Merchant Account: 3 Steps to Get Started

After doing some initial research, Aisha had started to think that a merchant account by way of another software provider would be the way to go. 

That way she’d be able to take payments at events through a card swiper, as well as setting up the online store the theatre’s top fans had been asking her about. 

However, she wasn’t sure how much work would be involved, so she decided to do a little more research on how to set it up. 

nonprofit merchant account

1. Setting up a Merchant Account

A merchant account allows your organization to directly accept debit and credit card payments whether they are online or not.

To set up your merchant account, you can contact a merchant account provider and coordinate 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.”

2. Set up a Payment Gateway

A payment gateway allows credit card information to be entered directly into a form on your site. It can also refer to the tool that you use to swipe the credit cards in person. 

There are a number of providers such as Authorize.net, PayPal Pro, or WA Pay. 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. 

As I mentioned earlier, some software options will also allow you to integrate with them automatically. 

3. Add a Link to Your Payment Gateway

paypal nonprofit online payment processing

 

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 the example of a PayPal donate button in the image to the right), or a link to include in your emails and other communications.

How to Choose the Credit Card Processor that Works for You

Regardless of the payment option you’re looking into, there are a few questions you’ll want answered before investing in any of the options.

I’ve listed more questions you might want to ask yourself before selecting a payment processor here, but the three main factors to consider are listed below. 

1. Do You Trust Them?

When you think of buying and selling online, which services come to mind as having a solid reputation?

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.

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. 

This should also be a consideration when it comes to security. All credit card processors you look at should be PCI-DSS compliant, meaning that they follow the security procedures outlined by major credit card brands to keep your customers’ information safe. 

2. How Easy Is It To Use?

Ease of use is a huge factor in the selection process. If the credit card processing 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.

Ease of use isn’t only important for you, either — it’s also crucial for membership payments and donations to be easy for your supporters to complete. 

A payment or donation may be abandoned before it’s completed if the process isn’t 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 set up appropriately.

3. How Much Does It Cost?

Reading the fine print, talking to a support agent, and calculating some simple math may save you money in the long run. 

For example, 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, one nonprofit I know, 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. 

 

Nonprofit Credit Card Processing: A Few FAQs

Even though she was feeling confident about her choice to invest in credit card processing, Aisha knew it wouldn’t be easy to convince her executive director.

So, before getting started, she decided to put together a few replies to the top questions she’d encountered throughout her research. 

Do nonprofits pay credit card fees? 

Yes. A transaction or processing fee may apply for your nonprofit if you begin to accept credit card payments, whether online or in-person. As mentioned before, this varies depending on the payment processor and credit card, but is typically between 2-3% per transaction. Some nonprofits may also ask their donors to pay the fee associated with the credit card during the donation process. For more information on just how to ask that, keep reading! 

Can nonprofits use Square?

Yes, you can use Square as a nonprofit. Square is an option that many nonprofits use to process payments because they also offer an app and card reader for in-person transactions — you can simply plug the card reader into your phone and accept credit card payments at events. For credit card transactions, their fee is 2.6% + 10¢ per transaction, and for manually-entered transactions, it’s 3.5% + 15¢. They do not offer a nonprofit rate.

Does PayPal waive fees for nonprofits? 

Paypal does not waive processing fees for nonprofits. However, they do offer a discounted nonprofit rate for registered 501c3 organizations. Instead of their usual 2.9% + $0.30, they charge 2.2% + $0.30 per transaction and waive the monthly fee for charities.

How can I ask donors to cover processing fees? 

Although accepting credit cards can allow you to reach out to a larger donor base, you may be worried about getting a smaller amount per donation given the processing fees.

To counteract this, consider including a box on your donation form, like Sacramento Loaves & Fishes, that donors can check if they want to cover the processing fees. Many donors aren’t aware of the credit card fees for charitable donations, and are happy to contribute a little extra to help you out.

 

And if you’re wondering if it’s too much of an ask, don’t be concerned. Classy found that, when it was enabled on their platform, donors chose to cover transaction fees 55 to 60% of the time. Since donors have already decided to invest in you, asking them for a little more typically isn’t a problem.

 

Now that Aisha had a list of the reasons credit card processing could benefit her theatre, as well as answers to some of the most common questions, she felt a lot more confident talking to her manager and her board about it. 

 

She was sure that using online payments, and in particular being able to accept credit cards, would be a huge boon for them — and now that she’d done more research, she was just as sure that she’d be able to convince her team of it as well. 

 

I hope that this article has helped you learn more about how credit card processing can benefit your organization. If you have any questions, feel free to comment below! 

Tatiana Morand

Posted by Tatiana Morand

Published Thursday, 28 November 2019 at 10:24 AM

Comments

  • John Haydon said:

    Friday, 06 February 2009 at 5:08 AM

    Rebecca,

    Wow! This is an amazing post - everything any non-propfit would ever need to know about online payments.

    For the http://12for12k.org project, Danny Brown uses a widget called ChipIn that integrates with paypal.

    Thanks again.

    John

  • Lain said:

    Friday, 06 February 2009 at 6:51 AM

    This is wonderful, Rebecca.  I love it when y'all do the research for me!  Thanks.

    Right now we use Click & Pledge to accept donations, but we will begin hawking our wares online later this quarter.  We've had nothing but a smooth ride with Click & Pledge, but it'd make sense to have one payment processor instead of two.  I've been shopping around mainly between PayPal and Google Checkout.

    Google Checkout was especially attractive given that we are a Google Grant recipient, but since that discount ends in 2010, I wonder if it's worth the hassle (and the ease of use issues you've cited above) given that our online volume is currently an unknown.

    So, I think we're going to give PayPal a try unless an astute commenter on this blog can convince me otherwise.  Thanks again!

  • Sharon Hurley Hall said:

    Saturday, 07 February 2009 at 6:49 AM

    This is chock full of information for anyone needing to handle online payments, especially if you're looking for alternatives. Thanks for this comprehensive review.

  • Jan Gunter said:

    Sunday, 08 February 2009 at 4:29 AM

    We use Kintera for online payments.  We are able to create various payment portals (see website - Donate Now button).  Our newest one which will be operational this week, will be for our upcoming cycling invitations.  Each rider will have their own page for donations, complete with thermometer to show their progress toward their goal.  We are thrilled with this personal donation page feature and believe it will be a significant source of donations for us this year and moving forward.

  • Rebecca Higman said:

    Monday, 09 February 2009 at 12:28 PM

    Hi Rebecca,

    I work for Network for Good and I wanted to say a quick "thank you" for including us in your comparative write-up. This is definitely useful information and you've taken a lot of the research legwork out of the process for nonprofits!

    I would like to make one note: The price and hyperlink you have listed are for a TechSoup annual subscription promotion that includes Custom DonateNow (CDN) and EmailNow together.

    New customers can absolutely sign up just for CDN: Set-up fees are just $199 and then it's $29.95/month plus 3% transaction fees. All customers have the opportunity to include a custom question on their donation page to ask whether donors would prefer to cover that 3% or have it deducted from their donation.

    Here is a link to the CDN info page with all of the numbers and info: http://www.groundspring.org/services/donatenow.cfm

    Let us know if you have any questions!

    fundraising123[at]networkforgood[dot]org

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Monday, 09 February 2009 at 12:36 PM

    Thanks for the additional information about Network for Good, Rebecca - being able to purchase the Custom DonateNow service separately could make a big difference to a non-profit's budget. Much appreciated!  I'll update the post to reflect this information.

    And another update here  -- I've just had a note from someone at ProPay who tells me that they do, in fact, have special deals for non-profits if you contact them to ask about it. I'm hoping to get more details on that shortly, and will pass that info along as soon as possible.

  • Trevor Smith said:

    Monday, 09 February 2009 at 1:08 PM

    I found a company, called Merchant Focus, that has special pricing for U.S. based non-profit organizations at www.merchantfocus.com  They offer a merchant account and a authorize.net gateway account, with no setup fees at all.  No termination fees either which I have found some of these companies try to get you with. The merchant account fees are: 2.09% discount rate for visa/mc 25 cents per transaction and a 10 dollar monthly fee.  The gateway pricing is cool because they give you the 1st 250 transaction free and then 5 cents after that.  

  • Online Payments said:

    Wednesday, 11 February 2009 at 1:12 PM

    Are you sure you don't work for merchant focus, mr trevor? o_O

    -Jack

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Saturday, 14 February 2009 at 9:23 AM

    Here's an update from Michael Burgoyne, Account Executive at ProPay Inc. (mburgoyne@propay.com), who invites your inquiries about ProPay's special rates for nonprofits:

    "The monthly processing limits are somewhat low – up to $5,000 per month for the larger package – but we are able customize for specific needs. For example, a local chapter of a wildlife non-profit signed up for our premium plus account for regular monthly processing that would not exceed the $5,000 limit. However, they have one big fundraising banquet per year where they raise $20,000. ProPay was able to enable them to have that one big processing month. Despite the pre-packaged solutions online, we can customize to the processing needs of an organization which we have found to be more sporadic."

  • Remi said:

    Sunday, 01 March 2009 at 10:57 AM

    Hi I am very interested in this topic. A major problem for our organisation at the moment is the hundreds of credit card payments we take all require an invoice to be manually generated, entered into our accounting software, and reconciled against receipts from the credit card merchant service. Does anyone know of a software that automatically creates invoices? We would love to be like amazon and itunes and email our customers an automated invoice the same day!

  • M Osborn said:

    Wednesday, 04 March 2009 at 5:26 AM

    2Checkout.com is not a payment service, and cannot be used for donations.  2Checkout.com is a retailer and thus can only accept goods and services for resale.  Donations are specifically excluded and are listed on the list of prohibited products and services at https://www2.2checkout.com/documentation/allowed.html

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Wednesday, 04 March 2009 at 6:44 AM

    M Osborn, thanks for the clarification. My initial thought was that a retailer service might be an appropriate way for professional associations to offer products and services to members, but I see from the "prohibited" list that 2Checkout has placed restrictions on the sale of seminar and event tickets! Not so useful, after all - I'll take it off the list.

  • Judy Bowes said:

    Monday, 25 May 2009 at 2:10 PM

    We are a small non-profit animal shelter currently using PayPal for online donations. The problem we have with PayPal is that if someone is trying to pay with a credit card and has EVER had a PayPal account in the past, PayPal will NOT accept the payment unless the donater uses the SAME credit card that they used to originally set up the PayPal account.

    I ran into the same problem when I tried to donate online. I couldn't remember my password, as I hadn't used PayPal in years. And, I didn't even have the same credit card I used at that time. It took me over an hour to contact PayPal, get a new password, and go into my account to enter a new credit card.

    NO ONE is going to go to all that trouble to make a donation.

    I get a report from our website host, Homestead, when we get a donation, but when I go to check out the PayPal account - It's not there. We have lost a LOT of donations because of this.

      I contacted PayPal and was basically told "Tough Luck" - the only way to fix it, is to do what I did.

      I Need an EASY, SECURE, method of collecting donations on line with credit cards AND a system that can handle montly pledges to our shelter. I am not HTML literate, and need an easy integration.

     That's about the only good thing that PayPal has to offer.

    ANY SUGGESTIONS?

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Monday, 25 May 2009 at 2:22 PM

    Judy, unless your website host has an alternate suggestion for you, perhaps the easiest option would be to add a second payment option for your donors. Have a look at Google Checkout? It's far from perfect, but because of the company behind it, it is one that your less-tech-savvy donors are likely to be relatively comfortable using.

  • Mike said:

    Sunday, 13 September 2009 at 5:15 PM

    I've been looking at EFT Corp. Seems as good on the surface as any...

    Anyone have any knowledge?

  • Milan Patel said:

    Monday, 12 October 2009 at 12:46 PM

    Hi all---

    My organisation is a small nonprofit based in Switzerland. I've been trying to set up donations via Paypal, but I have been advised as follows:

    "We appreciate your interest in PayPal.   However, due to legal and

    regulatory constraints, PayPal Private Limited is no longer able to process

    payments for Charities, Political Party/Organization Donations, Non-Profit

    Organizations (NPOs), Religious Institutions, etc in those countries under

    its jurisdiction.  You may refer to the PayPal Private Limited User

    Agreement link

    (https://www.paypal.com/sg/cgi-bin/webscr?cmd=p/gen/ua/ua-outside) to

    review the list of countries under its jurisdiction.

    This is not a decision we make lightly, and we deeply regret any

    inconvenience or frustration this matter may cause you.  Please understand

    that this decision is final."

    Unfortunately I see nothing in the given link that indicates that they do not process donations for Swiss nonprofits.  This leads me to believe that Paypal will likely stop processing payments for all nonprofits.  I've tried repeatedly to have them clarify their stance on the matter, but they are only able to send me the same message over and over again.  I thought everyone should be aware of a change in Paypal policy.

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Monday, 12 October 2009 at 2:19 PM

    Milan, thanks for the note. That certainly seems like an issue that could use clarification from PayPal, and so far I too haven't been able to find explanation on the PayPal site. I'll see if I can find anything out - and, meanwhile, I hope you'll post back here if you hear anything further? Thanks again for sharing this.

  • Anna D said:

    Friday, 26 February 2010 at 10:08 AM

    Thanks for the article - I'm learning how to be more web design literate everyday, but online donations have me a little confused.  This article basically summed up everything I have found online, with one exception - Amazon now offers a payment account which you can use for Donations.  Does anyone have comments on using Amazon's donation button (I've looked through a lot of their reference material, and right now it seems like it would be a great asset for our website)?

  • Paypal and the unincorporated nonprofit said:

    Sunday, 07 March 2010 at 10:23 AM

    We are an unincorporated association.   We used Paypal to collect payments and small donations, but Paypal objects if you ask for donations and are not a registered 501(c)(3).  

  • Lori Halley [Engaging Apricot] Lori Halley [Engaging Apricot]

    Lori Halley [Engaging Apricot] said:

    Sunday, 07 March 2010 at 11:25 AM

    I'm not sure what you mean by "Paypal objects"...?

    There is an approval process, presumably to help prevent fraud by unscrupulous people who set up fake nonprofits, but here's what Paypal has to say about nonprofit approval for collecting donations:

    If you are collecting donations as a charity or nonprofit organization, your account’s nonprofit status must be confirmed.

    To begin the approval process, submit contact information, business URL, and a brief business summary to compliance@paypal.com.

    We might request that you provide:

    • Proof of your tax-exempt status or registration from a regulatory body
    • A copy of a bank statement or a voided check in the name of your organization

    The exact documents required are based on the regulatory laws for your country. We’ll contact you if we need additional information.

    If you have a registered U.S. 501(c) 3 organization, your charity’s fees might be reduced.

    Donations that are not associated with a charity or nonprofit organization are not subject to these requirements, but all donation transactions are subject to review and must comply with all of PayPal’s Acceptable Use Policies.

    More info at https://www.paypal.com/us/cgi-bin/webscr?cmd=p/xcl/rec/donate-intro

  • Alyson Brinn said:

    Friday, 30 September 2011 at 10:23 AM
    We too have seen the PayPal horror when someone who previously had a PayPal account just wants to donate and move on. They torture that poor soul, who simply gives up.

    Google Checkout seems no better, forcing a registration/signup for a harried donor who does not want to give up their life to Google.

    Blackbaud/Kintera is not cheap, but at least works well.

    We'll check out Network for Good. Maybe Ticketfly would allow nonprofits?

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