While we were attending the Future of Money Summit in San Francisco, a few non-profit companies came up and asked us what their options were for accepting donations by credit card. Non-profits are very vulnerable to being ripped off by processors because of a lack of understanding about the credit card processing industry, so here are some tips when considering the options:

1) Consider what types of transactions you will have.

Some non-profits take one time donations while others take recurring donations. This can greatly influence which processing option is best. Handling recurring donations is best done with a merchant account since the whole process can be automated based on the payment schedule and payment amounts. If your non-profit rarely takes donations but woud still like to have the option, consider Square, a new service which allows the iPhone to be used as a terminal without signing up for a merchant account. The fees are a bit higher, but are worth it for infrequent transactions.

2) Avoid third party processors.

Third party processing is not a good option for most non-profits for a number of reasons. When a third party processor is used, it is their name that shows up on the donor’s credit card statement, instead of your non-profit’s name. This greatly increases the chance for chargebacks (since the donor may not recognize the processor’s name) which are costly. Also, since third party processors process your donations using their own merchant account, there is usually a lag in the time needed to give your organization the money donated.  Advantages to using a third party processor are that it’s usually easier, and may be slightly cheaper. The most well known third party processor is PayPal, which has special options for non-profits.

3) Consider getting a merchant account- but be informed

Merchant accounts can often be the cheapest and easiest way for non-profits to accept donations. However, the key to getting a good deal on a merchant account is to be well informed and know exactly what pricing structure to request. Otherwise, the process can become frustrating and complicated. A big advantage to getting a merchant account is that your non-profit’s name will be on the donor’s credit card statement, which greatly reduces the chance for chargebacks. Also, the funds from donations will flow directly into the non-profit’s bank account without a delay. Since the biggest disadvantage to getting a merchant account is a lack of knowledge, make sure to do your research. Make sure to demand an interchange plus pricing structure (learn more about interchange plus here) and use TransFS to get the best apples-to-apples comparison. Also, take advantage of our free savings analysis to learn how much you can be saving (fax your statement to us for the confidential analysis).