Payment processing can be one of the more complex aspects of estimating the cost of a donation management system. If you're new to accepting online payments or donations, or you're in the process of comparing donation management systems, read on for some clarity to an important but potentially confusing topic.
Every payment processor charges fees. The good news is that we've negotiated a low rate for our customers.
Stripe has no setup fees, no contracts, and no termination fees. There is a $1 fee for failed ACH transfers. In cases where a donor disputes a charge with their bank (also called a "chargeback"), losing the dispute could result in a $15 fee. If the donor contacts you first, it's easy to issue a refund right from within Giving. So, in practice, this should be a rare occurrence. Fees are in $USD.
Some donation management systems roll the cost of payment processing into the software subscription itself, and other donation management systems will show one simple rate for all payment processing, such as 2.9% for online donations.
We expose the processing fee rates for credit/debit cards and ACH because Stripe's pricing is straightforward. The rate does not fluctuate with volume; "credit cards" means all credit cards (including American Express), and ACH rates are appropriately priced lower than cards.
When we were researching payment processors, many churches told us what kind of rates they were getting. When we looked at their actual statements with them and did the math, what we found was this: their "effective rate" was almost always higher than the rate they thought they were getting.
Sometimes it was because the rate was variable and they didn't meet the tiered minimums. Sometimes their bill was offset by monthly or annual fees. Sometimes, they simply missed some small print (see the PayPal case study below).
The "effective rate" is the actual % you're paying for payment processing. It includes the % cost as well as the transaction fees. In short, it's the total amount you paid for getting money into your bank account. It's the thing you should care about most when it comes to estimating the cost of payment processing.
Lower Your Effective Rate with ACH
Your effective rate includes % fees as well as per-transaction fees. Credit and debit cards are processed at 2.3% + $0.30 per transaction. However, ACH fees are processed at $0.25 per transaction. More ACH donations lower your effective rate.
Ten $100 donations are made with credit cards. In total, $1,000 was received. The processing fees for the card donations totaled $26 ($2.30 + $0.30 x 10) making the effective rate 2.6%.
Five $100 donations made with credit cards and five $100 donations were made with ACH. In total, $1,000 was received. The processing fees for the card donations totaled $13 ($2.30 + $0.30 x 5). The processing fees for the ACH donations totaled $1.25 ($0.25 x 5). The grand total of processing fees was $14.25 making the effective rate 1.4%.
In Giving, we've made it easy to see your effective rate by calculating it each and every time Stripe deposits money into your bank account.
From the Donations page, go to the Stripe Payouts tab to view your effective rate.
In Registrations, go to the Payments page and select Stripe Payouts.
This allows you to see the breakdown of each transaction once you select the date of the transactions you'd like to see.
Stripe lumps ACH donations together when money is transferred to your account, which means your effective rate for some payouts will be higher than 2.3% (because of the per-transaction fees) when the payout is mostly credit cards, and much lower than 2.3% when the payout is mostly ACH donations.
PayPal has a great rate for qualified non-profits of 2.2% + $0.30 per transaction.
But, if you read closer in the "Additional Fees" section, you'll see, "American Express card usage fees: 3.5% per transaction." Since Amex cards represent a non-trivial amount of donations, that makes the overall effective rate somewhere closer to 2.5-2.6% for cards, depending on how many Amex donors you have. You'll also find there's a $30 monthly fee for the "PayPal Virtual Terminal" and a $30 monthly fee for "PayPal Payments Pro." Lastly, you'll note that there's no mentioning of ACH because ACH it's a part of that 2.2% rate.
Most donation management systems have processing fees intertwined into their price model. Planning Center Giving charges for the use of the software (the number of donations), but we make $0 from processing fees because our interests, when it comes to processing fees, are aligned with our customers' interests.
In the future, if we find that the marketplace has changed, and Stripe isn't keeping pace, we could add an alternative payment processor if we determine customers will be better served.
Now that you know about fees, locate payouts to see how much is being taken out for fees.