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The Truth About Donation Processing Fees (And Why You Should Be Mad)

By Leo Ramirez Posted on July 5, 2017

Fees seem to be everywhere these days. Want to access your money from the closest ATM? You will probably have to pay a fee. Take a close look at your utility bills; chances are you will find fees there, too.

Membership fees, late fees, processing fees – there are so many fees in our day-to- day lives that some days it may feel easier to just accept them. Here at Encast, we think differently.

Our WorkHERO workplace giving tool doesn't take away any portion of donations as a fee. Not a single penny.

We’ve eliminated the fee for employee donations. In fact, as far as we know, we are the only workplace tool that does not charge fees.

The fact is, donation processing fees are not always necessary, nor do they have to be as high as some providers charge.

What Do Donation Processing Fees Cover?

A donation processing fee is a small amount, either a percentage of your donation or a nominal fee, and sometimes it's a combination of the two.

Most commonly seen with online donations, the processing fee is designed to offset the cost of using a third-party payment processor. These rates can vary widely, depending on the company.

Additionally, since every third party payment processor charges nonprofit organizations fees to use their services, nonprofits often feel as though they either have to simply deal with fees or stop accepting credit cards.

Are Fees Really That Big of a Deal?

You may be thinking to yourself, "If it’s just 5 or 6%, is really that big of a deal?" The short answer is: yes.

Donors want to know that their financial gift is being used to help those in need. Ideally, most donors would like to see 100% of their donation used to help the cause. And many donors, especially millennials who have grown up with the internet and mobile technology, will do some digging before they even consider giving.

It’s this desire for transparency that has made charity ranking websites, such as Charity Navigator so successful.

When someone makes a financial donation, they do it because they want to make a difference. Sadly, due to scams and fraudulent charitable organizations, many people are skeptical of nonprofits and other charities. So they turn to Charity Navigator.

When Charity Navigator ranks a company, one of the most important things they look at is what percentage of donations are directly used for the cause. Organizations that charge the lowest fees may find themselves on Charity Navigator's list of “Perfect 100” charities.

If you look closely, you'll find that most of the organizations on this list use less than 4% of their donations on administrative or fundraising expenses. Stop and think about that for a moment. Then remember, 4% is at the low end of the scale for what you can expect to pay in processing fees.

Does it really make sense to spend the same percentage on your fundraising expenses as you do on processing fees?


How Do I Avoid Processing Fees?

There are a few of different ways to avoid processing fees, but for most of them, the onus falls onto the donors.

For example, simply having donors mail in a check will eliminate processing fees. But the truth is, more and more, we're making donations on computers and smartphones. We don't use paper checks as often as we used to.

Certain credit card companies also offer programs that put the responsibility for the fees on the donor, not the charity. Discover and American Express both offer giving programs for their cardmembers, called Discover Giving and Members Give, respectively.

When cardmembers make a donation through either of these programs, their card company automatically deducts a 2.25% transaction fee. If they have enough American Express membership points or a Cash Back Bonus from Discover, however, they can use them to cover the cost of the fee - ensuring your charity gets 100% of the donation.

Or you could simply use a giving software platform that doesn't charge any fees. WorkHERO is currently the only one on the market.

Don’t Just Accept Fees

Most charities, donors, and corporate social responsibility teams mistakenly believe they only have two options for fees – accept the fact that every donation will have 4-7% taken out or pass the costs on to the donors.

Neither of these are great options.

With WorkHERO, it is possible for 100% of donations to go to the charity, without forcing the donor to cover transaction fees. Ready to transform your workplace giving initiative with WorkHERO? Start your free trial of WorkHERO to explore the platform and see exactly how your donors can use it.


Author: Leo Ramirez

Leo is the co-founder and CEO of Encast, an organization dedicated to improving the way CSR professions create, manage, and measure CSR programs. Leo is passionate about the role that culture plays in business success. Leo has launched and managed social ventures, lead multi-disciplinary teams, and built solid relationships with civic and corporate leaders. His 25-year career has spanned executive management, business development, consulting, nonprofit management, technical support and engineering positions with Southwest Key Programs, Oracle, Sun Microsystems, Coremetrics, Trilogy and Apple.

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