Should you ask nonprofit donors to cover gift transaction fees?

I’ve written about this before. But since I continue to get questions, I’m writing about it again.

Fundraisers wonder about the upsides and downsides in asking donors to cover credit card and other gift transaction fees.

Hmmn…

First, let me be upfront in letting you know my gut emotional response to doing this is “no.”

Why?

Because it puts too much focus on the monetary transaction, making would-be donors think about money rather than impact. And when people think too much about money, it brings up negative feelings. It may even stop them dead in their tracks.

But this is my emotional response; your mileage may vary.

And how your donors feel about this today may differ from how they felt about it three years ago. Or how they’ll feel three years into the future. Truth be told, more and more nonprofits are going this route. Whether that’s good or bad remains to be seen. But, it’s an open question and something you may want to investigate.

The Current Landscape

Here’s what I learned from a little research.

• Per Firespring and Givesource, if offered, donors chose to cover fees 65% of the time.
• Per Classy, if offered, donors choose to cover fees 55 to 60% of the time.
• Per Next After, 60% of donors covered the fees but there was a 38.5% drop in conversion rate. Even though average gift was up by 3%, overall revenue was 20.5% lower.
• Per Neon, if offered, donors chose to cover fees 50% of the time.
• Per iRaiser,50% of donors covered fees, adding an average 5% to their initial donation. Website conversions were not negatively impacted.
• Per Fundraise Up, those who donate $80 or less and cover transaction costs on their first donation are 14% less likely to donate again when compared to similar donors who do not opt to cover the transaction costs. However, other metrics lead them to recommend adding this option.

Agitator-DonorVoice summed up these findings, concluding it would be a shame not to include this option since a significant portion of donors do decide to cover the fee. However, since you can’t guess how donors will feel about doing this, it’s still a good idea to run an A/B test to understand your results. If you find, as Next After did in the tests they ran, that long-term effects negate short-term ones, you may decide it’s not worth the effort.

Whatever you decide, it’s important to engage in a transparent, donor-friendly manner.

Best Practices

Generally, you’ll add a checkbox to your landing page with the option for donors to add an amount to cover your fees. Here are the best ways to ask donors to do so:

1.  Be donor-centered by making donors opt in. 

This way you don’t risk folks missing the fact you pre-checked this box; then wondering why they were charged more than they expected. Consider there are currently state and national movements to get rid of what consumers consider hidden or junk fees; you don’t want to inadvertently wade into the swamp of what many consider a deceptive practice.

2. Assure the fee seems reasonable. 

A good starting point is 3 – 4% as this is what folks expect credit card processing fees to be. Beware platforms that charge excessive added fees donors may consider exorbitant.

3. Assure your system can calculate the total in real time. 

It’s imperative donors know what they’re committing to upfront.

4. Consider the gift + fee the whole amount of the gift.

This is important for tax deduction purposes, and is true unless a percentage goes for event tickets or some other quid pro quo. Thank donors accordingly (e.g., for their $52.50 gift; not their $50.00 gift).

5. Transformational messaging about impact matters!

Don’t talk about this as a “transaction fee.” Focus instead on the transformative power of the donor’s giving. Use positive, donor-centered language like “Make my gift go further by adding 3% to cover processing fees.” Or “When you pay this small business fee, you’ll be helping make an even bigger impact.” You want to remind donors how the added gift helps, making them a hero; not how it hurts you if they don’t opt in, making them a villain. Inspiration works better than guilt.

Other Strategic Considerations

There are multiple ways to leverage donor giving so you receive more funds to do your essential work, and donors feel good about giving you just a bit more. It will all add up. Asking folks to cover fees is one way, but you don’t want people to feel they’re being nickeled and dimed. So, be thoughtful. And also consider some of the other options.

1. Send a Survey

Rather than waiting until after the fact to see how your constituents feel about making an extra gift to cover fees, what about asking them before the fact? Send a brief survey to your constituents s asking them how they would feel about being given the option to make their gift go further? Something along the lines of: “Some of you have asked to have the option of covering donation processing fees so the full value of your gift goes directly to help. Would this be something you would support?” (Answer on scale of 1 to 5, with 1 being “this would tick me off,” 4 being “probably would not,” 3 being “neither for nor against,” 2 being “might do this,” and 5 being “I would totally select this option.”). You might decide to add this question to a survey you’re already sending out. When’s the last time you sent a donor engagement survey?

TIP: If surveying donors is not currently in your work plan, do this as soon as you can. It’s a good idea to send one every year as this can be a key strategy to improve donor retention rates.

2. Emphasize Monthly Giving

A $500 donor who is asked to make monthly gifts of $50 instantly becomes a $600 donor. That’s a hugely better result than paying 3 – 5% to cover processing fees on $500! Monthly donors are trending across all sectors, and retention and lifetime value for these supporters is phenomenal.

TIP: If you’re not rocking a monthly giving program right now, do this before you consider adding the option of covering processing fees. You’ll get a bigger bang for your buck.

3. Promote Matching Gifts

For folks who work at companies that match gifts it’s super easy for donors to double the value of their gift to you simply by filling out some paperwork.  But you can’t expect them to do it without a little nudge from you. Many companies do a poor job of publicizing the fact they offer this benefit. And even employees who are aware of it sometimes forget. Part of your job as a philanthropy facilitator is to make sure you don’t leave this free money on the table!

TIP: If you don’t have a written plan to secure matching gifts, including matching gift tools, do this before you consider adding the option of covering processing fees. You’ll get a bigger bang for your buck.

NOTE:  Billions of dollars in matching gifts funds go unclaimed every year. Part of this is because donors aren’t aware their employers offer these programs or how to access them, which is where your nonprofit can step in! I had the opportunity to join Nexus Marketing and Double the Donation for a 30-minute webinar specifically designed to answer all your questions and help you boost your year-end fundraising. If you missed it, you can VIew it HERE.

4. Evaluate Your Results

Whatever you do, make sure you don’t simply count initial results and call it a success or failure.  Do donors who cover processing fees today give higher or lower average gifts tomorrow?  Do they upgrade or downgrade their giving, or stay flat? Do they fail to renew at all?

TIP: It’s important to evaluate what happens to supporters’ gifts the next time they’re asked to give. And the time after that.

Closing Thoughts

Asking donors to cover fees is becoming more the norm than the exception. As people begin to see this option everywhere they are less likely to be annoyed when they see it offered by you. And if you make it optional, they certainly can decide to pass.

Plenty of donor databases and CRMs offer the option to cover fees through their online donation forms. Some are more cost-effective and user-friendly than others. So, if considering this, take a look at more than one option.

Also do some primary research. If you see this option offered by other charities, reach out to their development director and ask them about their experience. Ask if they’ve seen donations and numbers of donors go up or down. What are the demographics of their donor base (different generations may feel differently).Have they received complaints? Survey more than one charity, and take a look at their landing pages to see if the ones having success execute this strategy differently than those who do not.

The key, again, is transparency and making donors who go the extra mile feel good. It’s not unlike asking donors to consider making an additional gift by putting a stamp on the remit envelope when enclosing a check.

But, should this be your priority? It depends on what strategies you already have in place and who you, and your donors, are. Keeping in mind all the factors discussed in this article, give it some thought.

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