Charity CHAMPs – get involved with microphilanthropy now!

Non-profit transaction processing and misleading efficiency ratings by sylvng

Charity CHAMPS‘ mission is to encourage microphilanthropy, and as part of that, we’d like to be able to take micro-donations for charities. One of the things we’ve been grappling with is how to deal with the payment processing fees.  Most processing systems charge a flat fee plus a percentage, and although the flat fee is usually only around $0.30, if the donation amount is small (like $1) it doesn’t make much sense from an efficiency perspective to be taking the donation at all.  From what I can tell, existing microdonation sites take 1 of 2 approaches. They either 1) have a sponsor covering all their fees, in which case they can proudly say that 100% of your donation is going towards the cause OR 2) they request that the donor cover the small surcharge.

A source from one of the local micro-philanthropy organizations has told me that the second approach works extremely well, in that donors usually agree to give a few more cents to help cover operating costs. So I am curious to try it out with Charity CHAMPS, although optically the first option is better. In fact, the difference between the approaches is mostly in optics – organizations that do #1 are much more “efficient” with the donated dollar than those that do #2. Which is fairly misleading considering both are probably paying the exact same percentage of donations towards fees.  So the next time you look at those efficiency ratings, keep that in mind.

Having said that, not all the transaction processing systems charge the same amount, and organizations that are using purely online payment processing like Google Checkout are probably spending less on overhead in general than those that are with traditional bank merchant services. More on the different systems in the next post.

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