Reader's Question About Credit Cards Needs Answer
Thursday September 25, 2008
A reader has asked the following question and I would love to have your comments:
"I am Treasurer (volunteer) for a relatively small non-profit. We accept cards for member dues and donations and miscellaneous payments for service. Being on a tight budget, we are looking at all options. Credit card fees are not significant, but do cut into needed revenue. Declining to accept cards is an option, but could adversely affect cash flow or even discourage donations. On the other hand, a small add-on handling and service fee could be easily understood by the payer and is justifiable. My question is, is such an add-on (to recoup our cost) legal? Do you see non-profits doing this? If so, in what format? If there are legal issues, do they find a way around it? I say the latter because I believe some institutions do tack on cost or charges if payment is via card."
What is the current practice around recouping the costs of providing the convenience of credit card processing for dues and donations? Please leave your comments.
Comments
I would not recommend adding on an additional fee for processing credit cards. There are benefits that outweight the cost, such as convienence and the ability for donors to get airline miles and other rewards from their credit card usage. These encourage donors to use credit cards for donations and help to retain donors. If you do not accept credit cards, the number of donors you may lose could far outweigh the fees that credit card companies charge. It is just a cost of doing business in our modern electronic age that you need to build into your annual operating budget.
Good luck!
Jason Kirk
South Carolina Aquarium
I’d suggest recouping the cost of accepting cards (and then some) by looking into an affinity card program for your organization. These are now available for smaller organizations and provide both a revenue and a branding opportunity at no cost to your group or its supporters.
While it seems to make perfect sense to add on processing fees to recoup merchant fees, it is strictly forbidden by Visa and MasterCard rules. If discovered, a merchant could have its service terminated. Please read your merchant services agreement with your provider to understand more fully what you can and cannot do.
I, too, serve as a volunteer treasurer (among many other duties) with my non-profit; however, I’m a banker by trade and have experience selling merchant and treasury management services.
I’d have to agree with Jason, in that even if your merchant agreement would allow you to tack on the charges the benefits of not doing so greatly outweigh the costs.
www.charitynetusa.com/blog
Things have eased up for nonprofit and government agencies with Visa and MC. You CAN now add on a convenience fee to receive 100% of the donation or purchase amount to your organization. If people have the choice to pay by cash or check they can avoid this convenience fee but I believe most people donating or spending money with a nonprofit understand that funds are tight and everyone is getting lean and mean.
Joel is incorrect - the rules changed only for State and Local Governments and Education Facilities and only for MasterCard and Amex