Credit Card Processing for Non Profit Organizations

If your non-profit is looking to accept credit cards, it’s important to understand the basics of processing costs, and what’s different for registered non-profits.

• The Basics
  • Interchange
  • Assessments
  • Markup
• What’s different for non-profit organizations?
• What is a Merchant Category Code (MCC)?
  • Why are MCC’s important for non-profits?
• Processing Costs for Non-Profits
  • Pass-Through Pricing
  • Flat-Rate Pricing
• How do I get a competitive processing solution?

The Basics

In order to choose a processor for accepting credit cards as a non-profit organization, you first need to have an understanding of the components of the cost of processing. There are two fixed costs for everyone who accepts credit cards: interchange and assessments.

What’s different for non-profit organizations?

Credit card processing for non-profits still has the same components. Non-profit organizations still have to pay interchange, assessments, and markup, but with a processor who is familiar with non-profit processing, it may be possible to secure lower interchange rates and a lower total cost for you.

When I discussed interchange above, I mentioned that there are hundreds of interchange categories. For the most part, businesses and non-profit organizations don’t need to spend the time learning the ins and outs of the categories. Transactions will be automatically routed to the interchange category for which they qualify.

What matters for non-profits is that there are specific non-profit organization and charity interchange categories. A transaction processed through the non-profit interchange category will generally have a lower interchange rate than a transaction processed through a for-profit interchange category.

Transactions will only go to the lower-rate categories if your organization is correctly set up with your processor as a qualifying non-profit organization using the correct Merchant Category Code.

What is a Merchant Category Code (MCC)?

In credit card processing, a Merchant Category Code (MCC) is a 4-digit number assigned to a business or non-profit organization when they begin accepting credit cards. Your MCC has a direct effect on what interchange fees your organization will pay for credit card transactions.

Why are MCC’s important for non-profits?

The MCC assigned to your organization is important to you primarily because it influences which interchange categories your transactions qualify for. In order to qualify for non-profit interchange, your organization needs to be set up with a non-profit MCC. If you work with a processor who isn’t familiar with serving non-profit organizations, there may be a higher risk of being set up with an MCC that leads to more expensive interchange.

Processing Costs for Non-Profits

One thing to remember is that a correct MCC doesn’t automatically mean your non-profit organization will reap the rewards of lower interchange costs. In order to see the savings, you’ll also need to ensure you’re working with a processor who charges you the actual interchange rates. This means working with a processor who offers true pass-through pricing.

Flat Rate vs. Interchange Plus

For non-profit organizations seeking the most competitive credit card processing, the lowest cost solution will NOT be a flat-rate processor, such as Square or PayPal. While those kind of companies offer services that may be suitable for some businesses, flat-rate processing would not provide savings to a non-profit. With flat-rate processing, the goal is to simplify pricing so it appears less confusing. The goal isn’t to provide the lowest cost.

While every business and non-profit has to pay interchange and assessments, some processors charge the actual cost of interchange and assessments, and then add a small percentage markup on your processing volume to make their money. If you’re paying the actual interchange rates, you’ll benefit from paying the lower non-profit interchange rates for your transactions.

Flat-rate processors charge the same rate no matter what. The flat rate is intended to cover the costs of interchange, assessment, and their markup or profit. Even if your transactions qualify for a lower interchange rate, you don’t see savings. Instead, the lower interchange rate just means there’s more profit for the processor.

For example…

Let’s look at a simplified hypothetical situation to see how this works. Say you’re accepting a credit card payment for $100. In this example, we’ll use the Visa charity interchange rate of 1.35% + $0.05 per transaction, listed on Visa’s interchange table. Now let’s look at your processing options: you can work with a processor who charges you the actual cost of interchange (pass-through pricing) or a flat-rate processor.

When you process multiple transactions or larger transactions, the difference in cost can add up quickly. Why pay more than you have to? Taking credit cards through a processor who charges you the actual interchange cost can help your organization keep more of its money.

How do I get a competitive processing solution?

The good news is that with transparent pass-through pricing and the correct MCC, you can take advantage of the lower interchange rates available for qualified non-profit organizations. When deciding on a processor, you’ll want to make sure they have experience offering credit card processing to non-profit organizations, and that they’re charging you for the actual interchange rates you pay.

Credit card processing for non-profits doesn’t have to be a headache.

To get started finding competitive quotes, you can create a free account at CardFellow and receive quotes instantly with no obligation. Certified quotes from the processors in our marketplace are quoted with true pass-through pricing and very competitive markups. Additionally, there’s no cancellation fee at any time.

Sign up today to see how pass-through pricing can help your non-profit take credit cards without breaking the bank.