By alphacardprocess March 27, 2025
Running a nonprofit organization means constantly finding ways to maximize the impact of every dollar. While accepting credit card donations makes it easier for supporters to contribute, it also comes with hidden costs—credit card processing fees. These fees can slowly chip away at your funding if you don’t manage them wisely.
This guide is designed to help nonprofit leaders and staff understand exactly what these fees are, how they work, and what steps can be taken to reduce their impact. If you’re unsure whether to absorb these fees or ask donors to cover them, or you’re simply curious how much you’re losing in transactions, this article will walk you through it all—clearly, simply, and practically.
What Are Credit Card Processing Fees?
When a donor gives to your nonprofit using a credit card, the amount you receive is slightly less than what they paid. This is because part of that donation goes to various players involved in processing the payment. Credit card processing fees are the cost your nonprofit pays to accept this type of donation.
These fees are deducted automatically, and the amount that actually lands in your account is what’s left after these deductions. For nonprofits working with tight budgets, even a few percentage points lost per transaction can make a noticeable difference over time.
Why Do These Fees Exist?
The process of completing a credit card donation isn’t as simple as money going directly from the donor to your bank. Several institutions are involved: the donor’s bank (known as the issuing bank), the card network (such as Visa or Mastercard), your nonprofit’s bank (called the acquiring bank), and the payment processor (the platform you use, like Stripe, PayPal, or Square).
Each of these entities plays a role in verifying the transaction, ensuring security, and moving the money. For their services, they take a small cut of the transaction amount. These combined cuts make up what we refer to as credit card processing fees.
The Main Components of Processing Fees
Although the fees you pay are typically presented as a single amount, they’re actually made up of three parts: interchange fees, assessment fees, and the processor’s markup.
Interchange Fees
These are the largest chunk of the overall processing cost. They’re set by the credit card networks and paid to the issuing bank. The amount can vary depending on the card used (for example, a standard debit card might have a lower fee than a rewards credit card) and how the transaction is processed (in-person versus online).
Assessment Fees
This is a smaller fee charged by the card networks themselves—such as Visa, Mastercard, or American Express. It’s usually a flat percentage of the transaction and is non-negotiable.
Processor Markup
The final piece is the markup charged by your payment processor. This is the fee you might have some control over, depending on which provider you choose and whether you can negotiate rates based on your nonprofit’s transaction volume.
Pricing Models Used by Processors
Understanding the pricing model used by your processor can help you make sense of your statements and plan your budget. The most common models include flat-rate pricing, interchange-plus pricing, and tiered pricing.
Flat-rate pricing charges the same fee for every transaction. It’s predictable and simple, which is why many nonprofits prefer it—especially when starting out. However, the simplicity can sometimes come at a cost, with rates being slightly higher to cover all possible card types.
Interchange-plus pricing offers more transparency. You pay the exact interchange fee plus a fixed markup. This model often works out cheaper for nonprofits with higher donation volumes but requires more attention to fee fluctuations.
Tiered pricing groups transactions into categories (like qualified or non-qualified), each with its own rate. While it may seem straightforward on the surface, it can obscure how much you’re actually being charged, especially if many of your donations fall into higher-cost tiers.
How Much Do Nonprofits Actually Lose to Fees?
The average processing fee for nonprofits accepting credit card donations typically ranges between 2% and 3.5%. That might not sound like much per transaction, but it adds up quickly over time.
Imagine your nonprofit receives a $100 donation. With typical fees, you might see only $97 or $98 reach your bank account. If your organization collects $250,000 a year through online donations, processing fees could total as much as $7,500—money that could otherwise support your mission.
Should You Absorb Fees or Ask Donors to Cover Them?
This is a question many nonprofits struggle with. There’s no right or wrong answer, but there are some important things to consider.
Absorbing the fees ensures that the donor experience remains seamless. Donors often expect the full amount they give to support your work, and absorbing the cost maintains that expectation. It’s a donor-first approach, but it can eat into your budget.
On the other hand, giving donors the option to cover the fee—typically by checking a box at checkout—is a growing trend. Many donors are happy to do so, especially if it means their full intended gift goes directly to your programs. It’s a small gesture that can result in big savings for your organization over time.
Some nonprofits even build the fee into suggested donation amounts. For example, instead of asking for a $100 donation, they might suggest $103 to account for processing costs.
Tips to Reduce Processing Fees Without Hurting Donations
You may not be able to eliminate processing fees altogether, but you can take steps to reduce them—and the impact they have on your revenue.
Start by choosing the right payment processor. Not all processors are created equal, and some offer nonprofit-specific pricing. Do your homework. Look beyond the marketing claims and ask for the full pricing breakdown, including hidden costs like monthly fees or PCI compliance charges.
If your organization processes a high volume of donations annually, you may be able to negotiate better rates. Payment processors are often willing to customize their pricing if it means securing long-term business.
Another strategy is to encourage donors to give via ACH (bank transfers) instead of credit cards. ACH transactions come with much lower fees and are ideal for larger or recurring donations. While not everyone will be comfortable using this method, giving donors the option can make a difference.
You can also look at when and how donations are being processed. In-person credit card transactions (like those done using a card reader at an event) usually cost less than online donations. While it’s not always practical, mixing in some in-person campaigns can help lower your average fee rate.
Choosing a Processor That Works for Your Nonprofit
Selecting a processor isn’t just about fees—it’s also about features, service, and compatibility with your other tools. Think about what matters most for your organization. Does the processor offer recurring donation options? Is the donation form easy to use on mobile devices? Does it integrate with your CRM or fundraising software?
Many popular platforms, such as Stripe, PayPal, and Donorbox, offer solutions tailored to nonprofits. Others, like Bloomerang or Kindful, go further by combining payment processing with donor management features.
Before committing, test the system from a donor’s perspective. A confusing or clunky checkout process can cause donors to abandon their gift. And always read the fine print—some providers charge extra fees for chargebacks, statement access, or account inactivity.
Talking to Donors About Fees
One mistake nonprofits sometimes make is staying silent about fees. Donors appreciate honesty, and many are willing to help cover costs if they know how their money is being used.
Consider including a short explanation on your donation page. For example, “Credit card companies charge a small fee for processing your gift. You can help ensure 100% of your donation goes toward our mission by covering this fee.”
By offering donors a simple checkbox to add 2%–3% to their gift, you allow them to make a choice that benefits your organization without pressuring them.
Tracking and Reporting Fees Accurately
For transparency and budgeting, it’s important to track not just the gross amount of donations received, but also how much is being lost to processing fees. Most processors offer downloadable reports, and many integrate with accounting tools like QuickBooks or Xero.
Make sure your finance or admin team regularly reviews donation reports to understand trends and uncover opportunities to save. Clear reporting also helps when filing taxes or producing annual donor impact reports.
Remember, while processing fees aren’t considered fundraising expenses by the IRS, they are classified as administrative expenses. Keeping good records ensures compliance and helps your organization remain financially transparent.
The Full Value of Offering Multiple Payment Options
Offering credit card donations is no longer optional—it’s expected. But that doesn’t mean you should stop there. Expanding your payment options can boost donor satisfaction and reduce fees.
Consider enabling ACH payments, PayPal, Apple Pay, or even Venmo if your audience includes younger donors. Each option comes with its own fee structure, and by giving donors a choice, you allow them to pick the method they’re most comfortable with—and that could mean lower fees for you.
Final Thoughts
Credit card processing fees may be an unavoidable part of running a modern nonprofit, but they don’t have to be a constant burden. By understanding how these fees work, selecting the right processor, and communicating clearly with your donors, you can minimize their impact and keep more of each donation for your mission.
Remember, every cent counts when you’re working to change lives. The more control you have over your transaction costs, the more resources you’ll have to put toward the causes you care about most.
Don’t let fees take away from your purpose—manage them strategically, and your nonprofit will be in a stronger position to grow and thrive.