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Online charitable giving benefits banks

The growth of online charitable giving is a boon to nonprofits. But there's an unintended beneficiary of this cyber generosity.

By Stacy Johnson May 24, 2011 9:29AM

This post comes from Stacy Johnson at partner site Money Talks News.


How would you feel if you learned that when you donate $100 to a charity, you're adding only $97 to the charity's coffers, while making some nameless bank $3 richer?


That's probably what's happening if you donate by credit card -- which has become increasingly popular as charities join the rest of the world online.


According to a press release from Convio, a provider of software to the nonprofit industry, their clients raised more than $1.3 billion online in 2010, up 40% from 2009.


It's easy to see why those doing the donating prefer plastic. Credit cards are convenient, donations are documented, and cardholders can accrue perks like frequent-flier miles or reward points.

But that convenience comes at a cost to the charity on the receiving end. They typically pay processing fees -- known as interchange fees -- ranging from 1.5% to 3% of each donation. Result? Not only is the charity receiving less money than you intended to donate, you're contributing to the coffers of an organization you may not regard as all that charitable.


Credit card processors have waived their fees for some online donations. For example, shortly after the Haiti earthquake, MasterCard waived fees on donations to the Red Cross and a handful of other charities. Visa, MasterCard, and several major banks did the same after the Japan disaster. But in general, when it comes to interchange fees, banks consider charities no different than merchants. If they accept plastic, they pay fees.

What's a good Samaritan to do? Three options:

  • Nothing. Donating online is a convenience, and processing these transactions is an expense for Visa, MasterCard, and the various banks involved. So one option is to simply ignore the interchange fee and move on. After all, if you donate $100, Visa, MasterCard, and the banks may be taking in $3, but at least $97 went to the charity.
  • Increase your donation to cover the charity's processing costs. For example, rather than donating $100, donate $103.
  • Find another way to pay. If you bank online, simply send a payment to the charity via online bill pay, something that typically doesn't cost you or the charity anything. You might also allow the charity to debit your bank account. And, of course, there's the old-fashioned option: Send them a check.

More on Money Talks News and MSN Money:

Mar 24, 2012 6:58AM
Great article, but I would suggest the processing cost of a cheque would far outweigh the couple of bucks interchange fee
Jul 6, 2012 1:29PM
I do this for a living and I have to tell you that this part is wrong:

Find another way to pay. If you bank online, simply send a payment to the charity via online bill pay, something that typically doesn't cost you or the charity anything. You might also allow the charity to debit your bank account. And, of course, there's the old-fashioned option: Send them a check. 

It costs the charity a great deal of time, money and effort to process auto bill pay (which is just your bank sending us a check on your behalf), checks and EFT (debit your account).  The last one being the worst way to donate money actually.  Credit cards and especially credit cards online even at 3% are far far less than it costs us to process your check (or other methods).  It's not as simple as taking the checks to the bank like it would be if someone wrote you a check and even if it was, that would still be more expensive than the 1.5 -3%.

Charities aren't magical alternate realities where everything is handled by robots (Ok that would *still* be more expensive than 3%) but donating online gets it a lot closer to magic.

May 25, 2011 6:50AM
I did not know this. But, the fee is nominal; banks have to make money too. It's OK with me, I will give to charities online. I think 3.00 is small when you consider they get the money Now. I think the Red Cross needs to have money Now to help victims, of tornadoes. I am a cheerful giver.
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