Best Credit Card Processing Options for Nonprofits

Nonprofits are born to serve their communities. In this article, we take a look at how we can help nonprofits achieve greater success by eliminating unnecessary card processing fees in a number of different situations. For more information, you can book a free consultation with a payments expert.

Nonprofits are born to serve their communities. In this article, we take a look at how we can help nonprofits achieve greater success by eliminating unnecessary card processing fees in a number of different situations. For more information, you can book a free consultation with a payments expert.

Nonprofit organizations

Nonprofits are organizations that are dedicated to furthering or advocating for a social cause or point of view. A nonprofit can look like a number of things, for example the Bill and Melinda Gates Foundation, or a small retail store whose profits go towards scholarships for students. In order to be deemed a nonprofit, a company must be exempt from federal income tax under section 501(c)(3) of Title 26 in the United States Code. 

In a lot of scenarios, the way nonprofits create revenue is unique from other business models, since much of their income is usually in the form of donations. Nonprofits use several different types of software and hardware to collect donations and make sales. With SwipeSum, nonprofits can eliminate unnecessary payment processing fees and put their extra money towards something more worthwhile than banks and credit card companies. 

Software

To make the first steps in improving your payment options, you need to know what software you use to run your business, and whether the payments are attached. Let’s break this down into three categories:

  1. If you own your own point-of-sale, or business management software

Not only is this the most affordable option, but it’s also a potentially lucrative way to process payments. In this position, nonprofits have two options: The first option is a direct integration with a provider or gateway. As opposed to a direct integration with one provider, a gateway would allow you to work with multiple providers and is the virtual equivalent to a physical point-of-sale terminal located in most retail stores. An example of a gateway is when you check out in an eCommerce store and see options for ApplePay, PayPal, and manually entering your credit/debit card information. For more information on payment gateways, check out our article here

The second option is the most popular solution, and the one we tend to suggest– payment facilitation. Payment facilitation gives your software a more square-like experience to streamline payment processing. It essentially turns your software into a home base for all payments. For example, when you want some food delivered to you, you use the Postmates application to find a nearby restaurant, then order and pay through the app. Because Postmates facilitates the payment, it is a payment facilitator.

  1. If you license your software from a vendor

If this sounds like you, you’ll need to contact your vendor and see what payment integrations are available to you. Ideally, you'd get a quote from every possible integrated payments provider, and they'd compete on contractual terms and rates. Some of the best payment processing tools for nonprofits include iATS, CharityEngine, DonateKindly, and Snowball; iATS has a technology marketplace with hundreds of possible integrations on their website, while the other tools require you to create an account before viewing these options.

  1. If you operate without payment software

This means your business needs either a virtual terminal or physical terminal. You can contact almost any provider to receive these terminals. If you’re starting from scratch, we recommend that you find a consultant who specifically sources software and payments for nonprofits.

Hardware

There are thousands of payment hardware options including a wide range of point-of-sale systems and credit card machines. As the head of a nonprofit, you get to decide which is best for your organization. We have our own recommendations for wireless credit card readers and consultants who can help you choose, too. 

A Note on Third Party Payment Facilitators for Nonprofits

In the last few years, payment facilitators for nonprofit organizations like GoFundMe, Kickstarter, and Crowdfunder have become extremely popular forms of fundraising and collecting donations. What a lot of donors- and those looking to utilize these platforms- might not know is that these companies all collect a percentage of money that’s raised. For example, GoFundMe collects a 2.9% fee plus $0.30 on every donation received. These seemingly small numbers can add up, making it more beneficial for your organization to be its own payment facilitator. For more information on payment facilitation, check out our article about how payment facilitators are changing the payment processing landscape here

Rates

Arguably the biggest factor that comes into play as you are choosing the best payment processor for your nonprofit is the rates they charge for their services. In the process of selecting the optimal solution for your payment needs, it is important to negotiate the best rates possible, and there are a few things to consider when doing so.

The first is to determine the pricing structure that the processor is offering. There are three main types of pricing structures in the payments industry: Interchange-Plus (often referred to as cost-plus), Flat Rate, and Tiered Pricing. Interchange-Plus and Flat Rate plans are preferred because they are more transparent with their fees. Interchange-Plus is the most transparent, adding a fixed markup to interchange rates. Flat Rate plans offer a fixed rate for every single transaction and maybe the best choice for your non-profit if your ticket size is relatively low. Tiered Pricing is the pricing structure to avoid, because this plan is associated with exorbitant markups because there is more opportunity for the processor to inflate rates, leading to hundreds, if not thousands paid in unnecessary fees by the merchant.

Another thing to consider when negotiating rates is to make sure that you will be charged the cheapest interchange rates possible. As a nonprofit organization, you may qualify for capped interchange rates. This means that certain interchange programs will have a cap on their rates, leading to discounts that are unique to the nonprofit sector. It is important to take advantage of these discounts if your organization is eligible for them.

Take a look at the process through the perspective of a Nonprofit

Let’s break this process down from the perspective of a nonprofit. It’s easy to continue using the same software and hardware without examining your credit card processing fees. It’s natural to want to keep using the same system that you might have inherited as an executive, or that your board suggests. But you could be losing out on thousands of Ratdollars that ultimately go to banks and credit card companies if you don’t take a second look, which is free and one phone call away with SwipeSum. Furthermore, with the right set-up in regards to payment processing software, you could be generating more revenue by making donating easier- for example, with “text to donate” options, or simpler and faster hardware at in-person fundraising events. 

Here at SwipeSum, we hand you your best options for saving money and allow you to get to the real work: providing your customers with your products. 

For more information on how to go about switching your payment processor, check out our recent article here

Izzy Gillman

Izzy is a rising senior at Washington University in St. Louis studying Creative Writing and Psychology. She has been working as a Content Marketing Intern at Swipesum since June of 2020. In her free time, she enjoys journaling, running, and reading memoirs.

Read more
SCHEDULE a CONSULTATION

Connect with a payments expert and get a free consultation

We’re happy to answer any questions you have, discuss your merchant account, and describe the audit process.

Swipesum.Insights

SWIPESUM.CONSULTING

We help businesses make intelligent payment decisions.

Learn more about Swipesum
sales

Start with a free audit of your payments processing statements

Schedule an audit
Internships

Connect with a payments expert and get a free initial consultation

Book consultation