By alphacardprocess March 27, 2025
Fundraising is the lifeblood of nonprofit organizations. Whether it’s a small charity hosting community events or a global nonprofit receiving online donations, the ability to collect funds smoothly and efficiently is essential. But behind every donation lies a less visible reality—payment processing fees and other hidden costs that quietly eat into the funds raised.
For organizations operating on limited resources, even small transaction fees can have a significant impact. Many nonprofits focus on raising funds without fully understanding the expenses tied to accepting those donations.
Why Understanding Payment Processing Matters
In today’s digital world, most donors prefer the convenience of credit cards, debit cards, and online payment methods. As a result, payment processors have become an essential part of fundraising infrastructure.
However, just as you wouldn’t blindly accept a high-interest loan without reading the fine print, you shouldn’t enter into payment processing agreements without understanding the full cost. These seemingly minor expenses can add up, reducing your organization’s ability to make an impact.
Understanding how payment systems work and what fees are involved empowers nonprofits to make informed decisions, choose better platforms, and protect donor trust.
What Is Payment Processing?
Payment processing refers to the technology and services used to handle donations made through credit cards, debit cards, online wallets, and other electronic means. It involves several players, including the donor’s bank, your bank, credit card networks (like Visa and Mastercard), and a third-party payment processor that facilitates the transaction.
Although the process seems instant to the donor, it involves multiple steps behind the scenes—each carrying a fee. These costs are often bundled together and deducted from the donation before it reaches your nonprofit’s account.
The Main Types of Payment Processing Costs
When nonprofits hear the term “processing fees,” they often think of one flat rate. In reality, payment processing expenses include a range of charges. These fees may be itemized or blended together depending on your provider.
Transaction Fees
This is the most common cost. Every time a donor gives using a credit or debit card, your organization pays a percentage of the transaction—usually between 2% and 3.5%—plus a small fixed fee (like $0.30). If you’re using a platform like PayPal or Stripe, these fees are deducted automatically.
A $100 donation might result in only $96.80 reaching your organization after a 2.2% + $0.30 processing fee is taken out.
Monthly and Subscription Fees
Some payment processors charge a monthly fee just for using their service. These fees can range from a few dollars to over $100, depending on your platform and service level. While subscription-style plans may come with additional features, it’s essential to assess whether those features justify the cost.
Setup and Cancellation Charges
Although less common today, some processors charge an initial setup fee when you open an account. Others might include early termination fees or cancellation penalties if you decide to switch providers.
PCI Compliance Fees
To process credit card payments, your organization must comply with Payment Card Industry Data Security Standards (PCI DSS). Some processors handle this for you, while others charge a compliance fee annually or monthly.
Chargeback Fees
If a donor disputes a transaction and requests a refund through their credit card company, your organization may be charged a “chargeback fee.” These can range from $15 to $25 or more and may not be refundable—even if the dispute is resolved in your favor.
How These Costs Affect Your Fundraising
While each individual fee might seem insignificant, they can add up over the course of a year. A nonprofit that raises $500,000 through online donations could end up paying $10,000 to $15,000—or more—in payment processing costs.
This is money that could be used to expand services, pay staff, fund outreach campaigns, or support new projects. The bigger your organization grows, the more important it becomes to manage and optimize these behind-the-scenes expenses.
Choosing the Right Payment Processor
Not all processors are created equal. Some focus on retail businesses and may not offer features useful for nonprofits, such as recurring donations, donor management tools, or donation receipt customization. Others may charge more in fees but provide a better user experience or stronger customer service.
When evaluating payment processors, ask questions such as:
- What is the total fee per transaction?
- Are there monthly or hidden fees?
- Does the processor offer nonprofit discounts?
- Can the system handle recurring donations?
- Is it easy to integrate with your website and CRM?
Take time to compare several options before committing. Look for a balance between cost, functionality, and reliability.
The Role of Third-Party Fundraising Platforms
Many nonprofits use third-party platforms like Donorbox, Classy, GiveLively, or GoFundMe Charity to manage fundraising campaigns. While these platforms simplify donation processing and offer donor engagement tools, they often come with their own fee structures—on top of standard processing fees.
Some platforms charge a platform fee as a percentage of donations, while others operate on a “tips” model, where donors are encouraged to add an optional amount to support the platform. Be aware of how these fees are structured and how they affect your bottom line.
Additionally, these platforms may not always transfer donations instantly. Some hold funds for several days before disbursing them, which could affect cash flow for your programs.
Should You Ask Donors to Cover Fees?
One increasingly popular strategy is to give donors the option to cover processing fees. At checkout, donors are shown the total amount of their donation and offered a checkbox to add a small extra amount that covers fees.
For example, a donor giving $100 might be asked if they’d like to contribute $102.50 so the organization receives the full $100.
Many donors are happy to help when they understand why they’re being asked. Being transparent in your messaging is key. Explain that processing fees are an unavoidable part of digital fundraising, and offer a choice—not a requirement.
This small step can make a big difference over time, especially if most donors opt in to cover the fees.
Accepting Other Forms of Donation
While credit cards are convenient, they aren’t the only way to accept donations. Encouraging alternative methods can help reduce processing costs.
Bank transfers or ACH payments come with lower fees than credit cards and are ideal for large gifts or recurring donations. Mobile payment services like Venmo or Apple Pay are popular with younger donors, and some come with lower or no fees depending on your platform.
Offering check donations at events, or facilitating payroll deductions for employees of partnering companies, can also help bypass processing fees altogether.
The key is to give donors multiple options so they can choose the one that’s most convenient and cost-effective.
Tracking the True Cost of Fundraising
Many nonprofits focus on the amount raised, but fewer keep close tabs on how much they’re actually keeping after expenses. To get a complete picture of your fundraising efforts, track both gross and net donations regularly.
Build a system for monitoring how much is lost to processing fees, subscription fees, chargebacks, and platform costs. Include these figures in your financial reports and fundraising strategy meetings. The more aware your team is of these hidden costs, the better you can plan for them and find ways to reduce their impact.
It may also be helpful to calculate the average cost per dollar raised. This metric helps illustrate the efficiency of your fundraising strategies and can inform decisions about platforms, payment processors, and campaign formats.
Being Transparent with Your Donors
Donors trust your organization to use their money wisely. One of the best ways to maintain and grow that trust is through transparency.
Share how donations are processed, where the money goes, and what portion is used for administrative costs like payment fees. Include this information in your annual reports, donation receipts, and website FAQs.
If you’ve implemented measures like asking donors to cover fees or switching to a more cost-effective platform, let your community know. These steps show that your organization is being thoughtful and responsible with contributions.
Reducing the Burden of Hidden Costs
While some fees are inevitable, there are ways to manage and reduce them. Start by evaluating your current system. Are you using a processor that’s designed for nonprofits? Are you being charged monthly fees for features you don’t need? Are you giving donors the option to cover fees?
If not, it may be time to re-examine your tools and partnerships. Even small adjustments—like encouraging ACH transfers for larger gifts or renegotiating your processor’s rates—can lead to meaningful savings over time.
Also, consider bundling your donation tools, CRM, and event registration under one integrated system. This not only simplifies administration but may also qualify you for discounts based on your total volume.
Final Thoughts
Fundraising is about more than just raising money—it’s about doing so in a smart, sustainable, and efficient way. Hidden payment processing costs can quietly erode your fundraising efforts if left unchecked. But with a bit of planning, research, and communication, you can minimize their impact and make the most of every donation.
Nonprofits face enough challenges without losing money unnecessarily. By being proactive, transparent, and strategic with your payment processing, your organization can keep more of what it raises—and put it to work where it matters most: your mission.