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[ASK AN EXPERT] How Do We Tell Donors Paying By Credit Card To Pay The Associated Fees?

Donation Processing Fees
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Our Ask An Expert series features real questions answered by Claire Axelrad, J.D., CFRE, our very own Fundraising Coach, also known as Charity Clairity.

Today’s question comes from a nonprofit employee who wants advice on how to ask donors to pay associated credit card fees with purchases and donations. 

Dear Charity Clairity,

We would like to “pass on the fees” (as opposed to absorbing fees) for purchasing of tickets and sponsorships for our Gala. I’m looking for verbiage to add to our forms. We already ask people to “opt-in” to help cover fees at the end of the evening. We want to make fees the responsibility of the purchaser. We would like to make it mandatory, but would offer an “opt in” if that is what is suggested. The biggest point is that tickets and sponsorships are not gifts (well not completely, because they get to attend the event, that is part of the cost) and we want to be sure we are not losing any of the money to cc fees. Any help you can send my way would be greatly appreciated!

— Fed up with fees

Dear Fed up,

There are two ways to deal with fees, and the option you’re suggesting isn’t one of them. At least not one I’d recommend. Why?

It’s not donor or customer-centered anymore than a retailer is when they tell potential customers they’ll have to pay extra if they pay with credit cards. If it’s a performance the patron really wants to attend, they may do it the one time. But they’ll do it grudgingly, and they’re unlikely to return.

No one likes to be forced to pay a fee. In fact, it’s why many restaurants that begin charging a fixed, compulsory service charge to cover pooled tips for front and back of house staff rapidly did away with the practice. Consumers didn’t like it – because it was mandatory.

Here are the two ways I suggest handling credit card transaction costs:

  1. Consider fees a cost of doing business. Ultimately, the easier you make it for people to purchase a ticket the more likely they are to do so. Don’t think of this as “losing money,” but rather as gaining more sales – both today and tomorrow. Rather than ask people to help cover fees at the end of the event, why not ask them to make an additional donation to “fund a need?” I’ve often included a range of such funding options on silent auction bid sheets, giving guests the opportunity to pay whatever they wish to help with a specific project. Gifts in the range of $25 – $100 are common, and I’m guessing these amounts would more than cover your fees. Plus, people generally feel better giving to direct service than administrative costs.
  2. Include a fee “opt-in” box at checkout. Well over a majority will choose to cover your fees, and they’ll feel good about it because you gave them the choice. Use language like: “Make my gift go further by adding 3% to cover processing fees.” Or “When you pay this small transaction fee, you’ll make an even bigger impact.” This can even be something you pre-select, so purchasers have to uncheck it if they prefer not to pay. Bloomerang offers this option through its online donation forms. You might want to test this however, as it does risk people becoming disgruntled if they don’t notice the pre-selected box and wonder why their credit card statement reflects a donation of $103 rather than $100.

One final caution: You note that tickets and sponsorships aren’t gifts because the purchasers get to attend the event. While true, often a part of the ticket price is tax-deductible. With sponsorships, an even larger part of the gift is tax-deductible. Make sure when you thank donors for their payments you clarify which portion they can claim for tax deduction purposes. This, of course, is the donation amount minus the fair market value of goods and services you will be providing (e.g., drinks, appetizers, meal, entertainment). Use language like: “Thank you for your donation of $[full amount] for the Spring Gala of which $[portion of amount] is tax-deductible.” It is also good practice to indicate the amount of the ticket/sponsor price that is tax-deductible at the point of sale. For example, if you determine the FMV of your meal and entertainment is $85:

  • $1,000 Sponsor level- includes dinner for 2 ($830 tax-deductible)
  • $500 Patron level- includes dinner for 2 ($330 tax-deductible)
  • $200 Ticket-includes dinner for 1 ($85 tax-deductible)

Final thoughts

Do what you can to make giving to you easy and joyful. When you put up barricades requiring people to do things they believe should be optional, you’re shooting yourself in the foot before you even get started. Daniel Kahneman, behavioral economist, conducted substantial research on what’s known as “loss aversion” theory. He found fear of loss weighs heavier than hope of gain.

  • For you, stop worrying so much about the 2-3% of the ticket price you’re losing, and focus in on what you stand to gain if you double down on asking people to give in ways that feel meaningful, joyful and purposeful.
  • For your donors, stop hitting them in the face with thoughts about the extra fees you’re asking them to pay, and focus in on how you can make them feel they’re helping even more if they absorb those fees. Or maybe don’t mention them at all, and simply adjust the price of your tickets slightly upward.

You may be fed up, but guard against passing this fed up feeling along to your donors. If you do, that’s a surefire way to lose money, today and tomorrow. You have much better options!

— Charity Clairity

Have a question for our Fundraising Coach?
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