Merchant Accounts for Non-Profit Organizations

Merchant accounts for non-profit organizations are a way that non-profit organizations can begin to accept credit card payments or credit card donations. Read this article to learn if your non-profit organization would benefit from a merchant account, and what other options are available for accepting credit cards.

What Is a Merchant Account and Why Would a Non-Profit Want One?

A merchant account allows a merchant to accept credit card and debit card charges, either through a Point of Sales system (POS) where the physical card is swiped, online, or both. Although a merchant account may sound like something that is at odds with what a non-profit is about, the fact that it allows donors to use a credit card may work to the non-profits advantage. Whereas with a donation made with cash or a check, the donor only reaps the benefit on his or her tax return (and in his or her heart), with a credit card, the donor can also earn points, miles, etc., making this kind of donation more popular.

What Stands in the Way of Non-Profits Getting Merchant Accounts?

The key is to keep the set-up fees, monthly fees, and transaction fees low enough to make it worthwhile.  This may be a bit difficult to figure out, because the fee structures can be quite arcane, so if you’re not experienced in this area, a financial adviser can help you sort it out. If you’re doing your own calculations, look for terms like:

  • application fees
  • set-up fees
  • gateway setup fees
  • monthly fees
  • reports fee
  • account fee
  • statement fee
  • transaction fee
  • per item fee

In addition to the fees, if you are collecting donors personal and credit card information, you will need to meet PCI compliance standards for safely maintaining that information on your servers. This introduces a whole additional area of oversight and expense.

If you’re planning a large fund-raising push, it’s very likely worth the investment of time and effort to figure out how to do this. If you’re not getting regular credit card donations, you could end up paying a great deal for the occasional use. Now, if you could just get a donor to cover your credit card processing fees . . .

What Are Some Merchant Accounts for NonProfits that You Should Consider?

There are sevveral merchant account providers that are recommended for nonprofits. These include The Raiser’s Edge and DonorPerfect, both of which focus on the specialized needs of non-profits.

What Are Some Alternatives to Non-Profit Merchant Accounts?

A merchant account is not the only alternative for accepting credit cards.  A third-party processor uses its own merchant account and holds the donation for you, exacting a transaction fee for its service.

You could consider creating a donation system on your website that incorporates PayPal for example. Through PayPal, donors can use their credit card information without you’re having to know or maintain it. It takes a little longer to get your money, but it may be worth it, especially if you can convince your donors to add a little to their donation to cover any transaction fees. Network for Good iand Democracy in Action are other third-party processors through which your donors can make donations.

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