How To Choose A Credit Card Processor For Your Non-Profit
If you accept credit card payments online or in-person, there are two main options. You can use Paypal, Square, Stripe or another third party payment processor, or you can set up a merchant account. In addition, you’ll want to evaluate each processor on five criteria. Each has pros and cons, so let’s break them down and show you how to choose a credit card processor for your non-profit.
If you already know you’d like to set up a merchant account but you just need help choosing a credit card processor, scroll down to “Should I set up a merchant account?” and walk through the straightforward process.
Here are some basic concepts you’ll need to know before we dive in.
The 5 Criteria for Comparing Credit Card Processors
1 - How much does it cost?
Aside from just the transaction fee percentage, you’ll need to find out if a processor charges a monthly fee or a flat per-transaction fee. It’s not just how much they charge, but how often they charge it. Flat, fixed fees are more predictable and transparent--but that might not be the best for cost conscious business. By avoiding fixed rates, processors end up charging variable rates for different card types, so depending on your clientele, this could save you money or cost you more. In addition to the variable rates, your average transaction size and average quantity of transactions could also determine if you come out in the red or black.
Most processors, regardless of fee structure, distinguish between card-present (CP) and card-not-present (CNP) transactions. CNP transactions occur when a merchant keys in a credit card number by hand, and they are always more expensive because they carry an increased risk for fraud.
No one likes fees. So, you should know that they are all over statements and contracts in the processor world and some aren’t very transparent.
Here are some fees you’ll want to ask about and tally up:
Compliance fees
Interchange fees
Statement fees
Cancellation fees
Gateway access fees
Finally, outside of the rates, you’ll want to consider what eCommerce or Point of Sale (POS) devices you’ll need to use. Not all processors work with all POS machines, so you may need to include the up-front cost for new equipment if you find a great rate.
2 - Is it secure and does it protect me from fraud?
The main way to assess security is by using Payment Card Industry Data Security Standard (PCI-DSS) guidelines. Essentially, these guidelines dictate that your processor’s online payment system needs to be documented and accounted for. For brick and mortar sales, compliance is based on the hardware standards of POS systems.
3 - Does it accept different payment types?
In the age of COVID-19 you’ll want to consider having touchless or contactless payments available. These use Near Field Communication (NFC) and communicate with cards, smartphones, smart watches, and other wearable devices. Touchless payment systems and systems that accept chip cards are also most secure. It’s common for credit card processors to have all of these compliance factors included in their service and offerings.
4 - Does it work better with everything else?
Some processors offer POS software to accompany and integrate natively with your system and hardware. Some have a long list of partners you can choose from. The factors that will impact this decision for you will be how complex your business is. Do you have multiple locations? Do you have lots of inventory? In general, native integrations make reporting, compliance, and usability better.
5 - What happens when something goes wrong?
Depending on your business, you’ll want to evaluate if having 24/7 access to customer support is important. For some folks, it’s important to know you’re going to connect with a real live, breathing human being on the other end.
Should I go with a Third Party Processor?
Now that you know how to evaluate different types of credit card processors, we can dive into whether or not you’ll want to select a third party processor or set up a merchant account.
Third-party processors are easy to set up and easy to use. Most of them set you up with a flat rate, which means your statements will be more predictable and easier to understand where the money is flowing.
The only downsides are that they typically cost more in fees and they can sometimes take more time to transfer funds to your bank account.
In fact, Square was in the news for holding money. Square is optimized to get you set up fast, and they deliver. Their speed comes from their spartan application process. This policy has caught the limelight due to increased merchant complaints. How? By skipping some steps at onboarding, it means that Square must hold funds and can sometimes trigger surprise account cancellation by their fraud prevention department. What’s worse is that some merchants report that Square hasn’t had the customer support capacity to quickly remediate these issues, which means more merchants without an account and without their money.
If you really need predictable, flat-rate pricing but you also don’t want to pay extra fees to sign up with a third-party processor, we can provide you with options at Giv Local. Go here to check out our pricing options.
Here are some of the most popular third-party payment processors:
Square
Square is most easy to use for small, brick, and mortar businesses. Their integrations with familiar tools like the iPad make point of sale systems a breeze to learn and difficult to mess up. Square charges a 2.6% transaction fee for in-person payments. Manually entered card payments cost a bit more (3.5% plus 15 cents), as online and over the phone transactions demand a higher fee due to greater fraud risks. See Square’s pricing page, here.
Before choosing Square, be sure to read some of the risks inherent to their quick onboarding process. Here’s a NY Times article covering some of the challenges merchants face with Square.
Stripe
Stripe is the web developer’s processor. They make it easy for you to set up your web business to securely accept credit card payments online. Online credit card transactions cost 2.9% plus 30 cents. In-person card payments cost merchants 2.7% plus 5 cents. Stripe's web tools make it easy to customize the payments experience, making it ideal for subscription services, marketplaces, e-commerce stores, and B2B platforms. In addition to processing, Stripe also offers a range of software add-ons, including the Stripe Dashboard, Stripe Terminal, Stripe Checkout, Stripe Billing, and Stripe Connect. See Stripe’s pricing page, here.
Paypal
Paypal is ideal for person-to-person transactions or small businesses with fewer, larger transactions. For in-person sales, PayPal charges 2.7% per transaction, while online transactions cost 2.9% plus 30 cents per transaction. Payments made via PayPal's virtual terminal cost 3.1% plus 30 cents per transaction, and manually keyed transactions cost 3.5% plus 15 cents per transaction.
For in-person card acceptance, PayPal offers Here, a mobile credit card processing and point-of-sale system. In addition to credit card processing, PayPal offers robust customer service and merchant support and a streamlined financing program for merchants. For business services, PayPal integrates with software providers including BigCommerce, Shopify, and QuickBooks. See Paypal’s pricing page, here.
Quickbooks Payments
Truthfully, QuickBooks Payments is set up for small business accounting, but it also offers credit card processing. If you’re already using Quickbooks, you’ll want to consider this one. QuickBooks Payments lets merchants accept credit cards, debit cards, and ACH bank transfers and charges flat, per-transaction fees that are pretty transparent and clearly laid out.
For in-person payments QuickBooks charges 2.4% + 25 cents per transaction. Invoiced payments cost 2.9% + 25 cents per transaction fee, and manually keyed payments cost 3.4% + 25 cents per transaction. QuickBooks also requires you to have your own merchant account for credit card processing. See Quickbooks Payments pricing page, here.
Here’s a recap table that
outlines each of these third party processors:
Should I set up a Merchant Account?
The main benefit of setting up a merchant account is that once you’ve done it, you save money.
If you’re like most nonprofits, you probably want to find a way to make a merchant account work since it can save you considerable money on transactions--and in the age of COVID-19, refunds--but setting up all paperwork makes it feel impossible. That’s where we come in.
Our mission at Giv Local is to help nonprofits secure recurring revenue from their local business communities. So, we did the work and put together a 4 step process that will help you figure out how to choose the right credit card processor for your non-profit.
Step 1 - Identify and List Your Specific Needs
What types of payment cards do you plan to accept?
From which countries do you plan to accept payment?
How many payment terminals will you need?
Do you plan to accept payments online?
Step 2 - Identify and List Competing Payment Processors
As you do your research, you’ll want to log your findings in an easy to reference way. Remember those 5 criteria at the beginning of the post? You’ll want to use those here in this step.
Here they are again for easy reference:
How much does it cost?
Is it secure and does it protect me from fraud?
Does it accept different payment types?
Does it work better with my systems?
What happens when something goes wrong?
This will make life easier later when you need to do your evaluation, but it will also make your conversation with your board much easier. You’ll have all the competing processors lined up in an easy to understand format.
Step 3 - Look for Key Components of each Contract
Is it a single contract deal?
If you want to process American Express payments, you might require a separate agreement with Amex as well as with your payment processor. This depends on a few factors like how much dollar volume and who else the credit card company is working with. It’s complicated so we won’t go into that here, but you should be aware of this detail when you sign.What fees are involved?
There can be monthly fees, transaction fees, fees for special types of credit cards, and fees for transferring funds to your bank account. There are as many fees as there are types of insects. It can be a lot. If it’s not confusing enough already, sometimes your contract might look like you’re paying $0.25 per line item, but then there are separate fees added on that are all multiplied by the same transaction number. This means your actual rate might be much higher than the rate you think you’re paying.Do you need to maintain a minimum balance?
Balance that you are required to maintain in your reserve account for settlement if any.When are funds deposited?
When you will receive funds for the credit and debit card transactions processed on your behalf. Typically, merchants receive the funds one to three days after the transaction date but merchants that have had bad fraud experience may have to wait longer.When does it end?
Expiry date and whether the contract is automatically renewed unless you give notice. You should also see if there are any consequences for early contract termination.
Step 4 - Verify Your Processor Is Secure
Handling payment card information requires you to ensure that the information is secure. To do this, you’ll have to check PCI-DSS guidelines to ensure that credit cards received by your organization will be adequately protected.
Here are some tools that PCI has laid out for you on their website:
