Nonprofit, also referred to as not-for-profit, organizations operate a little differently than traditional businesses. 501(c) organizations typically provide a service, are a charity, or may provide grants. Nonprofits also differ from traditional businesses when it comes to paying taxes and other operational latitudes.
So what does that mean for a not-for-profit when they accept electronic payments? Today, we will review how nonprofits can process credit cards and other electronic payments, how donations may be accepted, and some of the benefits of receiving payments as a nonprofit.
Do Not-For-Profits Need a Merchant Account?
The short answer is yes, the vast majority of nonprofit organizations will need a merchant account. Here are a few reasons why:
To accept credit cards, debit cards, or other electronic transfers, you must have a merchant account. Merchant accounts are specialized bank accounts that run through a merchant services provider to accept credit card transactions and more.
Most donations and membership fees are paid electronically. Not only that, but many of these types of incoming payments are recurring payments. Merchant service providers can help to set up and maintain recurring payments.
Nonprofits often sell merchandise and/or event tickets. Most merchandise and live event presales are done online. Accepting online payments is actually quite different than traditional card-present transactions.
Credit Card Donations and/or Payments to NonProfits
So how exactly can a nonprofit accept donations, purchase payments, and more? While there are near-infinite iterations, the way in which you will receive payments boils down to in-person, point of sale transactions or online, e-commerce transactions.
In-person transactions might involve the use of a point of sale (POS) system. If the nonprofit organization has a brick and mortar presence, this is a common choice. However, many nonprofits will opt for a mobile payment solution to allow for more flexibility. Many wireless credit card machines read EMV chip cards, making them as secure as traditional POS system credit card transactions.
Online transactions carry their own set of considerations. Data security, authentication, and phishing attacks are all legitimate issues when accepting donations or other payments online. Nearly all e-commerce transactions will flow through a payment gateway. Working with an experienced merchant service provider to process these payments helps to protect nonprofits from potential security threats. Without safeguards like CardSecure, accepting online payments is perhaps the riskiest of all mainstream electronic transfer types. Coincidentally, it is also quite a frequent method of accepting donations, membership fees, and other payments for nonprofit organizations.
How Not-For-Profit Organizations Find Payment Processors
So how exactly should not-for-profit organizations get set up with payment processing? First and foremost, any nonprofit should take the time to understand how payment processing works at a high level. This will allow the organization to make well-informed decisions about their finances. The more important amongst those decisions is landing on a payment processor.
Selecting a payment processor is a necessary step towards accepting credit card, debit card, ACH, and EBT payments. Nonprofits should consider the following when making this selection:
Does our nonprofit need a merchant account or a payment service provider (PSP) account?
What type of credit card processing fee structure suits our organization best? Examples include monthly membership fees or interchange-plus billing which provides more detailed information per transaction.
How will the payment processor secure our transactions?
Does the merchant service provider have a full suite of products and services to keep us covered?
Is this a payment processor we can trust? This can get lost in a sea of numbers and features, but your merchant service provider is ultimately responsible for handling payments, security, and more for your nonprofit. Selecting an organization you can trust is essential.
Do NonProfits Receive Discounted Credit Card Processing Rates?
The short answer to the question of whether nonprofits pay less for credit card processing rates is: maybe. This again comes down to your choice of merchant service provider/payment processor and your relationship therein. Many processors will offer discounts for credit card processing rates for 501(c) organizations, but there are no guarantees here.
Each merchant service agreement is unique, and this should be negotiated upfront. This is yet another reason why working with a merchant service provider who offers transparent pricing right off the bat is so important. Hidden fees, flexible rates, and much more can end up costing you in the long run. By working with a payment processor who will take the time to understand your unique situation, both parties can benefit.
True Merchant Helps NonProfits Process Electronic Transactions and Much More
Merchant account services can be needlessly complex. That is why at True Merchant we strive to simplify the process and choose payment processing solutions that fit the individual needs of our clients and their businesses. Our merchant service professionals are able to provide flexible pricing options that fit the budget of just about any business. We are proud to offer a wide range of services including payment processing, CardPointe, CardSecure, EBT payments, and much more.
For more information, feel free to contact our sales team today and find out how True Merchant can go to work for your small business!
