Online fundraising is a popular strategy for nonprofit organizations looking to reach a wider audience and raise more funds, as it allows donors to give from anywhere, at any time. However, a common concern associated with this fundraising strategy is that payment processors and credit card companies charge fees for accepting donations online.
When it comes to most of our online interactions, we’re accustomed to doing many things free of charge. So, your nonprofit might be asking, “Why must donors pay an additional fee to support our purpose?”
In this guide, we’ll explore online donation fees in greater detail and explain how your nonprofit can maximize its revenue, despite the added costs. Let’s get started!
What are online donation fees?
Online donation fees refer to the costs associated with accepting online donations through payment processing platforms, such as credit card processing fees and platform transaction fees. These fees are charged by the payment processor and/or the online fundraising platform used by the nonprofit to accept online donations.
Nonprofits need to be aware of these fees, as they can affect the amount of money that goes directly to their programs or services.
Why are there fees associated with online donations?
Payment processors and third-party payment providers charge online donation fees to offset the costs associated with transferring funds, maintaining their technology platforms, managing fraud risks, and complying with regulations.
After all, these companies are working behind the scenes to keep their valuable services up and running, so they need money—just like your nonprofit does!
Common types of online donation fees
There are fees associated with online fundraising for at least one of two possible reasons:
Credit card processing fees
Credit card companies or payment processors charge this fee for processing credit card transactions. These fees typically range from 2-3% of the transaction amount and can vary depending on the type of card used, such as whether it’s a credit, debit, or international card.
Even if you were to set up your own online payment account to accept online donations via your website (i.e. through PayPal or Stripe), card processing fees would still apply.
Platform transaction fees
Platform transaction fees, on the other hand, are fees charged by online fundraising platforms for processing donations made through their platform. These fees typically include a percentage of the transaction amount, which can range from 1-5%, as well as a flat fee per transaction.
Some platforms charge a flat fee upfront, while others charge based on a percentage of whatever you raise through their platform. Others will charge more depending on how many supporters interact with you through their platform or how many features you want to use.
Invest in online fundraising despite online donation fees
Despite the associated fees, online fundraising offers a number of benefits for both nonprofits and donors. For nonprofits, online fundraising can reach a larger audience than traditional fundraising methods, potentially increasing the number of donors and donations received.
It is also a convenient and cost-effective way for nonprofits to raise funds, both eliminating the need for printing and mailing fundraising materials and reducing the need for staff time spent processing donations. Additionally, online fundraising platforms provide nonprofits with valuable donor data, including demographics, donation history, and engagement metrics. This data can be used to improve fundraising strategies and donor outreach.
For donors, online fundraising is convenient, as it allows them to make donations from anywhere at any time, using their preferred payment method. Online fundraising platforms also offer opportunities for donors to engage with nonprofits on a deeper level and learn more about their impact.
Strategies for reducing online donation fees
Although online fundraising is beneficial for both nonprofits and donors, the added cost can cause financial strain. To offset online donation fees, consider:
- Allowing donors to cover processing fees. Many online fundraising platforms allow donors to opt-in to cover their donation’s processing fees as an additional donation. This can help nonprofits maximize the amount of funds received from each donation while still offering the convenience of online giving.
- Choosing the right payment processor. Compare the fees charged by different payment processors, including credit card processing fees and platform transaction fees, and choose a processor that offers competitive rates and transparent pricing.
- Negotiating fees with payment processors. Negotiate credit card processing fees with payment processors to obtain more favorable rates. Some processors may offer discounted rates to purpose-driven organizations.
By implementing these strategies, you can reduce the fees associated with online fundraising and maximize the amount of funds received from each donation.
Key takeaways about online donation fees
While online donation fees can reduce the net amount received from each donation, accepting donations online is a sustainable fundraising strategy. Remember to make informed decisions about choosing a payment processor and to employ methods for minimizing the associated costs. Doing so will help your nonprofit more effectively pursue its purpose.
