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The Ultimate Guide to Payment Processing for Charities


In this digital age, the ability to process any form of payment from any location is an important asset to conducting business. A payment processor allows for exactly this - it seamlessly transfers funds from the bank account of your supporter to the bank account of your organization. This can be in the form of a card-present transaction or an online one. Nonprofits everywhere require safe and reliable ways to process credit card donations in-person and straight from their website, and payment processors make that possible.

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What is Payment Processing for Charities?

When someone purchases something or makes a contribution online, they cannot physically remove the funds from their bank account and hand them to you as they would with cash. This is where payment processors such as Dharma, Square, Stripe, Braintree and more come in handy! Your supporters could be miles and miles away, or they could be donating on account of another organization. Whatever the case may be, for a virtual funds transfer, you will need an online payment system for nonprofits.

Once the transaction is sent, your payment processor will send the information to the bank in order to verify it. It does this through a series of protections, and the information is encrypted more than once. As long as the funds are available in the account, and the information is valid, the card providers will approve the transaction, and the cash will be sent to your organization’s merchant account. There is an extra cost associated with some credit cards, such as American Express, while the rates associated with more commonly used cards like Visa are quite low.

charity-payment-processing-what-isEmily is taking some quick notes on the basics of payment processing.

Each processing company charges a different fee for domestic transactions (international fees are often higher). Usually a certain percentage of each transaction is taken, from 2% to 3%, sometimes with an additional $.20 to $.30 per transaction. These rates ensure each company involved in the processing of payments - including the payment processor, the issuing bank and merchant bank, as well as the card issuer (like Visa and Mastercard) - get paid for moving money and data along. Each payment gateway has different pricing, and some of them offer discounted rates for nonprofits. 

Your payment processor allows you to sell your merchandise online, accept membership subscriptions, donations, and payments for event tickets or auction purchases. When you are able to accept these things online, you diversify your revenue streams substantially. As the world becomes more and more technologically driven, it is important to have this option - with it, you can potentially be supported by people all over the world! 


The Benefits of Payment Processing for Charities

Payment processors can truly expand your nonprofit’s field of vision. They, for example, facilitate the buying and donation process on multiple levels: they both allow for online payments, and as a result, they encourage payments made to your organization, as your nonprofit’s vision becomes visible to internet users all over the world.

Simplicity of Use

One of the biggest pros is that the general public is already accustomed to making online payments with a third-party processor (just think about how many times you have shopped online in recent months!). It is a great idea to adapt to the preferences of your supporters. You can easily process all kinds of transactions; all you have to do is set up your payment processor, place the right buttons on your website, and you are mostly set. 

Most of the online donation platforms will have seamless integrations with your website. The bills you receive for your transaction costs are usually easy to understand, and you will likely get them towards the end of each month. The entire process has become so common that the majority of these elements have already been streamlined for your convenience. Your bills might even be accessible and payable from the app that has been specially created by your payment processing company for its customers.

Better Cash-Flow Management

When you can accept payments from anywhere, in any currency, you can receive payments and donations wherever your donor is. They can be in a different time zone, or on the other side of the world. They will not have to convert their money into the form of currency your organization uses; they can just click and send, all thanks to your charity payment solution. 

charity-payment-processing-benefitsSimon is loving the benefits of payment processing for charities!

There is less delay than receiving checks through the mail, or waiting for your in-person events to gain revenue. Your money arrives directly into the online account, the same day it is sent by the donor. This reduces the amount of manual tasks you will have to perform, while keeping the stream steady. 

Pro Tip: One of the biggest bonuses of online payment is that recurring revenue can be implemented automatically. When your patrons set up recurring donations, you can make plans for the long-term knowing that they are committed to giving for a significant amount of time. If they have autopay activated, you will even know which days the funds will be sent. 

The Safest Payment Solution

If we look at the numbers, the most targeted payment method for fraud is the check. For example, 74% of financial professionals reported in 2019 that their organizations’ check payments were subject to fraud attempts. This is a prevalent form of payment for many business to business transactions, and often, they are used for higher sums. 

When it comes to online donation tools, the locations of the devices are traceable, and the perpetrators are more visible. This results in online payment fraud being extremely rare. With in-person payments, an organization can receive fake money without the donor even knowing it. And if someone gives you a bad check, it can be hard to trace the origin to rectify it. You risk less as a nonprofit by catering to online transactions because your banking information gets encrypted and is therefore far more safe.

If your organization wants to reduce the fees associated with bank card transactions, there is an online solution that resembles your average everyday check. The fees associated with this payment method are very low, and it involves taking money directly out of your patron’s bank account, mobilizing that money through one channel, and putting it directly into your organization’s merchant account. This type of payment is called an ACH payment.


Is ACH Payment Well-Adapted to Charities?

ACH payments are best suited to transactions that involve high quantities of money, or recurring payments. Therefore, they can benefit organizations and their most loyal  donors greatly.

What is an ACH Payment?

ACH stands for Automatic Clearing House. An ACH payment refers to a type of payment that features one middleman - the Automatic Clearing House - and two bank accounts, the patron’s and the merchant’s. A payment processor will still take a small percentage out of each transaction, but rates are usually far lower than those made with bank cards. 

ACH payments can be recurring and often are, but they do not have to be. Whenever you have an automatic bill payment that is taken directly out of your bank account, it is likely an ACH payment. Whenever you simply log in to an online account and make a one-time payment on a bill using your bank account number and routing information, it is likely an ACH payment. ACH payment processing for nonprofits can save your organization a great deal of money in fees, especially on large donations.

ACH transactions get processed in batches, so your account will routinely receive a lump sum at a scheduled time with all of your ACH payments from that period. 

Pros & Cons of ACH Payment for Charities

  • Pros

If your donors choose ACH payments, the transaction fees are much lower, and donors can give without having a credit card. It also is altogether more secure, since the sensitive information is not bouncing from server to server to be verified. 

  • Cons

The payment process can be a little intimidating, and supporters may be reluctant to give you their account details. There is also a long response time in the event of payment failures, making fraud attempts difficult to deal with. Fraud attempts are nonetheless very uncommon with ACH payments because information is so secure. 

ACH payments are an asset to charity payment processing because they allow your organization to keep as high of a percentage of large donations made to you as possible. They also allow donors to set up recurring payments, which means less thought on their part and a reliable source of revenue to look forward to from your most avid supporters.

charity-payment-processing-well-adaptedAnthony appreciates the pros and cons of payment processing for charities being laid out.


Final Thoughts

An online payment processor is a vital piece of any nonprofit organization. It helps to diversify your revenue streams, and it makes it easy to organize and manage your incoming subscriptions. There are tons of charity payment solutions, and they are every bit as safe as they are convenient. 

ACH payment processing is another great way for charities to accept recurring payments, as long as the donor is comfortable sharing their account details. If they are, this process is altogether more safe than online payments, as the information never has to go into the airwaves in the first place. 

As you seek out the best payment processor for your charity payment processing, take your time to consider all the pros and cons. You’re well on your way to a wider stream of revenue! 

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