Credit Card Processing for Nonprofit Organizations - Payment Processors & Credit Card Processors for Nonprofit Payment Processing
Credit Card Processing for Nonprofit Organizations - Payment Processors & Credit Card Processors for Nonprofit Payment Processing
So your nonprofit has been growing and it’s time to level up on the way you collect funds from your donors and make it even easier to process their donations in a way that’s easiest for them and provides a great donor experience, congratulations! Payment processing for nonprofits has come along way with all the new technologies and even currencies that can be used, and there are definitely a lot of questions that need answering before choosing the best option for your specific nonprofit.
Utilizing as many payment methods as possible is always a smart way to go for any nonprofit as it offers convenience for donors as well as increased giving opportunities. Plus these processors give you access to a global reach as well as other pluses like allowing donors to set up recurring donations and the reduced handling of cash in addition to the transparency of all your transactions for reporting purposes.
But on the flip side there are also a few drawbacks like all of the fees or costs that are attached to many of these payment gateways. Each has different rates and amounts you can save working with them. In addition, many credit card companies place a hold on funds for a period of time before releasing them to your business, so there are always cash flow issues. Then there are the technical aspects of integrating the payment processor into your website or donation platform which can be a technical challenge for some.
With as many potential pitfalls as well as benefits, what are the right choices and what steps need to be taken in order to get the best results with the smallest amount of hassles? That’s exactly what our deep dive into nonprofit payments is all about. So grab a pen and paper and get ready to take a few important notes. By the time you’re done reading, you’ll have an MBA on credit card processing as well as other nonprofit payment options.
Understanding Processing for Credit Cards
Credit card processing is an electronic system that accepts payments from an individual using either their credit card or debit card. The way it works is an individual makes a payment at some sort of payment gateway using their card. Next the transaction is authorized, authenticated and funds are taken from the individual’s bank account if it’s a debit card, or added to their statement if it’s a credit card. Finally the transaction is settled and the funds are moved to the merchants account which would be your organization's bank account.
Having your own dedicated payment processor can be advantageous as you are usually not paying any additional fees you’d pat otherwise to payment gateways like Paypal or Stripe. Your also ensuring that your donor’s private financial data is secure and not being passed to a third party processor.
The problem is using a processor for credit card and debit card transactions through a merchant account also means you’ll be responsible for data security and you’ll need to comply with standards like the Payment Card Industry Data Security Standard (PCI DSS) to protect cardholder data. This is actually quite a responsibility and you’ll often need special coding a network protocols to be sure everything is actually secure. This is why most nonprofits just go the much easier route of using a third part processor like PayBee or Paypal.
Online Donation Tools vs. Credit Card Processors
When it comes to online donation tools like PayBee, and a credit card processor like PayPal, there are a few very important distinctions to understand as they are two very different type of entities.
PayBee is an online nonprofit platform that has many tools to help your charity or foundation to take all sorts of payments effortlessly. And this means for both your organization and your donors. This is due to our donation pages are fast and mobile friendly and can accept a host of different payment processors or methods. But while we can and do take payments on behalf of your nonprofit, we don't actual clear the payments.
Rather, we use a third party credit card processor as well. Our tools just make everything easier for organizations to manage their finances using our platform, plus we keep track of all of your relevant data. This way you can easily host a virtual and live gala event while using our platform to process the ticket fees, donations, and any other contributions your event receives both off and online and all seamlessly for your donors.
But all the finances we collect still go though a third party credit card processing company. This is because these companies are extremely specialized in what they do as far as credit cards, and have immense compliance issues that are next to impossible for a nonprofit to adhere to without a specialized team. These companies often do not offer the specialized tools a platform like PayBee can either, as they process funds for thousands of different types of companies all around the world.
Why Nonprofits Need Specialized Credit Card Processing
There are a few important reasons why nonprofits should seek out specialized credit card processing special designed for their sector. The first reason is nonprofits often want and need specialized features like recurring payment options and mobile options that are mobile friendly and easy to use online, reassuring donors trust that the platform is safe for them to be using.
Speaking of technology, another reason to seek out a specialized company is they will be familiar with most fundraising software and platforms and will have code ready to be deployed on these platforms for seamless integration, giving your donors a completely safe environment to freely give within the technologies you’re already employing to run your nonprofit. This will also make staying compliant much easier.
Then there are companies that give better rates as far as fees and other costs associated to nonprofit transactions. Over the course of a year these seemingly small fees can add up to some serious money and should never be ignored. If you can get a better rate and all else is the same, then take advantage of the money saving opportunity and go with the cheaper payment processors.
Features to Look for in a Nonprofit Credit Card Processor
When discussing features and benefits of a specific credit card processor, there’s a lot to think about. The first thing should be what your overall goals are for payment processing. They should be ways to streamline donation collection, reduce costs, and enhance donor relationships. Then from there you can think about all of the other bells and whistles some companies add to entice your business.
For those of you that aren’t familiar with all the options, we’ve included a list that you can pick and choose from to come up with a complete payment processing solution that’s tailored to your specific organization’s needs. Here are some ideas to get you started:
Experience with Payment Processing in the Charity Sector
It’s so helpful when a company already works within our sector and is familiar with our specialized needs when it comes to donors, their management and legal aspects like financial reporting in order to stay 501 compliant. If possible, choose a company that already works with a bunch of nonprofits and demonstrate on their sales and marketing pages that they know what your type of business needs and the solutions they’ve tailored specifically for this sector. You can even be proactive and ask them for nonprofit references and follow up with them to see if they’ve had a positive experience with the company.
Competitive or Reduced Fees for 501 Merchant Services
Many companies realize it’s good business for them to also support nonprofits. And at the end of the day, they can reap rewards for working with nonprofits and get the same benefits as other tax free donations. It’s also often great PR for a company to reduce their fees for a nonprofit and hype how they’re behind your organization for public relationship purposes. Always ask up front a list of all their fees and if there are tiers or levels of pricing or even a free version to test out, or if there are other hidden fees like a set up fee, or monthly user fee in addition to the regular processing fees. This is definitely one time you want to read the fine print.
Multiple Payments Gateway Options for Charities
The best payment processors will allow you to use a variety of payment processing options, not just credit cards. Your processor should include larger payment gateways like PayPal, Wise, Payoneer, Stripe and Square, all on one easy to use form and not just Visa and MasterCard options. Some of the best ones even include the acceptance of cryptocurrencies and other alternative forms of payments. After all, you have no idea what types of payments your donors are using, so the more options they have to choose from, the easier it will be for them to make a donation on the spot. Plus you can even go a step further by using Tap to Pay with PayBee which gives you the freedom of accepting donations on the spot with just a mobile device. No credit card reader needed!
Seamless Nonprofit Payment Processing Integration With Your Software
The last thing you want to do is to send a first time donor to an online PayPal website page to make a donation. It simply looks unprofessional. Rather, a great payment processing company will give you multiple ways of integrating their forms and payment processing power into what ever software or nonprofit software platform you choose. You should always be able to customize their code to match your company's branding and their gateways should always include things like SSL protocols in order to keep all your donor’s sensitive financial data confidential, especially when making online payments. These forms should also include options like monthly payments as well as allowing for event management options like selling tickets to the event, or paying for auctions and not just simple donation options.
Nonprofit Credit Card Processing Reporting and Analytics
Reporting is a must for any charity as you need to stay complaint with the IRS as a 501 charity. This means you need to have complete records of all of your donations and having a processor that can give you these types of financial data in a variety of ways can be a real help come tax time. Even better if the processor allows you to integrate your CRM into the donation flow so you can get targeted data on your donors and their giving habits.
Large credit card processors often have code you can add to your CRM software to gather all the data you need, but it is always wise to check if they allow this and if they work with your current application. If not you’ll need to hire a developer which can end up costing quite a bit of money. This is often why many of our clients prefer using PayBee rather than opting for their own credit card processor.
Now that you have an idea of what the right nonprofit credit card processor can do, it’s time to look at your own organization’s needs and decide which features you truly need and can’t live without, and what ones might be a nice addition. Just pay mind to the costs if there are any for all the additional features you’d like in your own payment processing. Remember, even the tiniest fees add up over time!
Benefits of Using a Specialized Payment Processor for Nonprofit Organizations
When it comes to accepting donations for your charity both off and online, it can be seriously helpful to employ a credit card processor that already has a lot of experience in the nonprofits sector for a variety of reasons. This comes down to the fact that charities don’t collect or report income the way a for-profit does. That means reporting and compliance are serious issues due to the complex regulatory restrictions of 501s. Companies that have worked with nonprofits prior are often familiar with specialized PCI DSS and tax reporting standards require for nonprofits and have systems already in place.
Nonprofits also have very unique ways of gathering revenues from donors, and use all types of galas, auctions and other fundraising activities to raise money. So your processor must be able to work with the ways your specific charity raises donations. That means allowing you to process transactions at live events with an app or credit card machine, both of which are available through PayBee. And of course online forms that integrate with your own website or platform so your donors never have a problem making a donation.
Specialized solutions also often include donor management and CRM integration so you can track and collect data on a number of options. This data is extremely helpful when you want to know the successfulness of your events, or where your donors are in the donor life cycle so you can engage with them more effectively. This can all equate to better donor relationships over time and allow your nonprofits to continually grow and prosper.
Support is always a big issue, especially with larger companies that treat their clients more like numbers than people. One tip here is to do a bit of research on the web and see how responsive their customer service is. When possible, ask other companies that you know are using them specifically about any support issues they’ve had. Launching a campaign and finding out at the last second you’re non-profit can’t accept donations for some reason and no one from customer support is around to help you is a situation you do not want to find yourself in!
And last but not least, the idea of fees and costs associated to nonprofit payments clearing. More often than not the companies offer discounted fees to 501c organizations and foundations as they also receive benefits from their generosity. If you don’t see anything on their website that implicitly states they give discounts to charitable organizations, contact them and ask as most companies do have special pricing. And while you’re asking about prices, also ask them what their hold time is on transactions for credit cards, and how often they make payments.
As you can see, there are definitely a few important benefits when it comes to working with a specialized payment processing outfit. And although it make take a bit of time to find one that matches all your needs, the research is worth the time and effort.
Common Misconceptions about Processors for Nonprofit Organizations
Like any industry, there are still a few misconceptions about payment processors and how they relate to the nonprofit sector. The biggest myth if you want to call it that is that all processors are the same. And as we have already stated a few times above, this is most definitely not the case.
There are many differences between processing companies, and even they often specialize in different industry sectors to better assist their clients. Luckily, there are also those companies that primarily work with nonprofits, or at least are familiar with our needs and special circumstances and are armed with the correct tools and specialized features for working with 501c organizations.
These companies will also offer cost-effective solutions that include lower fees and faster payouts. So payment processing isn’t as expensive as many other industries and many companies will work with you on their fees further if you are running enough transactions through their system. Just ask!
Another false belief people have is that credit card processing is too complex an area to tackle for a nonprofit. This is absolutely not the case today. Now, most companies can integrate their systems into your website or software platform in minutes, giving you a host of payment processing options pretty much at the push of a button.
Your nonprofit doesn’t need to be huge to get all of these perks either. Big and small organizations can benefit from specialized payment processors, and there are rarely any sort of minimum thresholds any longer as the payment processing sector has become competitive as well. So don’t think you need to be a big charity processing millions of dollars of donations a year. Many companies will work with small and even start up nonprofits with no money.
Best Way for Nonprofits to Accept Donations Online and Off!
The best way for nonprofits to accept a myriad of different types of payments including credit card processing is using a gateway rather than an actual credit card processor. The gateways make collecting donations breeze, and with their plug and go technologies, it can take minutes to incorporate a payment processor into your donation collection work flow. Remember, companies like PayPal, Stripe and others that make collecting donation easier aren't actual credit card processors, they're payment gateways that also add features for their clients looking for tools to take payments.
PayBee - Yes, we believe we are the best at helping your organization collect donations and other forms of payments from fundraising to invoicing. And it's not just because we work strictly with charities. It comes down to the fact we also incorporate a ton of highly advanced tools so as you collect your donor's contribution, you're also gathering an immense amount of data on your donor. You can easily create a donor record that will show all of their gifts, review when and where they made the gift, and automation aspects like sending out a receipt and thank you note immediately after receiving the donation. This not only allows you to collect your funds, but it also helps manage the entire donor process all from one transaction.
PayPal - Yes, PayPal does work with nonprofits and is a highly trusted online transaction processor as well as being able to accept in-person credit card transactions (you'll need special readers or a POS for this!) as well as other online payment options. We also include PayPal as an option for fundraising on our own platform so you can have a variety of payments to choose from. In addition, PayPal does indeed offer reduced rates on its processing fees for any nonprofits that choose them for their nonprofit payment processing. They do not however offer any sort of CRM or tracking data, so it does come with limitations. Most often, you'll incorporate PayPal into your website or platform and use your own tracking and donor management software.
iATS - iATS Payments by Deluxe is a unique payment processor in that this company only works with nonprofits. It also is more of a pure credit card processing for nonprofits and works with credit cards and debit cards only. If you're using a page to collect donations and have multiple payments, this is a good one to offer for strictly credit cards as they do have some of the lowest payment processing fees in the industry. The short coming is that the company only deals with the big four credit card networks, Visa, Master Card, American Express and Discover. So although their nonprofit payment processing for nonprofits is second to none and they do have lower payment processing fees, they should be made an option and not your only source of accepting donations.
Square - Square is more like PayPal and have their own Square Point of Sale app that can help 501c corporations act like a payment processor and collect donations from fundraising events and other sources using a credit card or online apps. Square also has features like PayBee as their app allows you to use any phone or mobile device as a digital fundraising POS application for payment processing, so you're able to collect funds in person or online. You're also able to collect donor information with Square which makes it a bit better than than the two previously mentioned card processing companies, but they are not a dedicated nonprofit software platform like PayBee, so there are still some limitations on what you can do with this payment processor company, but their processing fees aren't ridiculous.
adyen - If you're not using PayBee as your preferred payment processor, then the next best company for payment processing is definitely adyen. The company is sort of a catch all for a ton of different options for payments from companies like Visa and Master Card to PayPal, Stripe and ApplePay. The biggest problem with them is that onboarding your non-profit can take up to two full months. Nothing like the instant access to donations you'd instantly have using something like PayBee or PayPal. Furthermore you need to use their developers to add adyen to your website or platform, which will also incur additional fees. So while there are potential advantages to using them like a lower fundraising, there are also a few pitfalls you need to weigh.
There are obviously many more options for payments than what we've listed here for you. It's just through our experience, these companies are the easiest to work with for fundraising and we trust that you won't have many issues with any of them. But of course you'll need to do your own due diligence and research the companies you think would serve your organizations the best, as organizations will have their own set of requirements as well as pros and cons.
What Are Some Best Practices for Optimizing the Processing of Credit Cards for Fundraising?
Now that you understand payment card processors and have hopefully found a sound solution for your merchant services, it's time to learn how to increase the efficiency of your payment processing for your nonprofit organization. That means you'll need to incorporate a few of the best practices like making sure you have multiple ways to use your new processor.
This means you should be able to use your processor both on and offline using any credit card. And with many of the payment processor companies we've discussed, this is totally possible. Using apps from the companies allows you to turn any mobile device into an online Point of Sale terminal or machine. So at a live event you'll just need a mobile phone to collect all the donations you want using the online app from your new processor.
And speaking of mobile phones, this also includes all of your processor's donation collection pages be blazing fast and mobile friendly while offering a multitude payments, not just credit cards for all your fundraising. Make sure your online pages integrate seamlessly with your own non-profit's branding and each payment's page is protected using the SSL protocol to protect your donor's data. For an extra boost, consider using pre-filled forms to reduce user friction even more and make it that much easier to give a donation.
You can really up your fundraising by offering a recurring donation option to your pages. You can display a popup when they are ready to pay asking, 'Would you like to make this a monthly donation?' For each person that chooses to tick yes, that's another donation you don't need to work for as far as fundraising.
How Much Are Credit Card Processor Fees for Nonprofits?
The amount of credit card processing fees for nonprofits varies from merchant to merchant. Each processing company has their own fee structure for processing credit cards that typically slides between 1 - 3% with some companies offering special discounts or reduced fees for nonprofits. If you're looking to save money on high transaction fees, you'll need to research and learn all the different company's fee structures.
How Can a Nonprofit Organization Accept Credit Cards?
Select a payment processor or merchant service provider like PayBee, PayPal, Stripe, Square, or other traditional merchant account providers. Then either add these to your website or nonprofit software platform and create dedicated pages to display the payments available.
Can Nonprofits Accept Recurring Payments and Donations Through Payment Processors?
Yes, organizations can take recurring online payments or donations through payment processors for nonprofits. Your organization can accept recurring payments and other card donations both as an online and in person transaction either on a month to month basis, or any other time frame you choose.
Can Nonprofit Organizations Allow Credit Card Donations at Events or Fundraisers?
If you're using a platform like PayBee or a few other payment processors, then yes, your organizations can definitely accept credit card donations at live fundraising events and fundraisers. Often a great platform will also provide an app that will work with any mobile device, making even a smart phone a POS system that can accept donations and credit card payments for nonprofit organizations.