A member of our support team asked me to explain in basic terms the business of electronic payments for those without business backgrounds who are serving in a ministry. This might help many of our clients and future clients.
Hang in here with me and keep those eyeballs from rolling back into your head! All payments (except greenbacks) are electronically processed today and come at a cost to YOU. Even greenbacks are credited electronically, and your “dollars” are simply digital figures not in a physical vault but in a computer server virtual “vault.”
Electronic Payments & Their Fees
Credit cards and checks all process electronically for a fee. If you are engaged in using electronic payments for online or recurring giving, you pay for that process just like a merchant would. When consumers use online bill pay, they “escape” these fees which are absorbed by their bank. The bank covers these fees, because the bank is making serious money from your deposits (your average daily balance), and they want to keep you. The bank often provides simple electronic payment tools to keep you as a ministry depositor. These tools limit your capabilities, however, which is why we built giving tools which are more robust and more useful for ministries.
Giving Through Checking Accounts
The acronym EFT stands for Electronic Funds Transfer and is about 45 years old. Time flies! This is the electronic payment pathway for checks between U.S. banks; checks are handled in a clearing house called NACHA (National Automated Clearing House Association), and the electronic check is called ACH. This is a tried and true system and is much more secure than sending checks through the U.S. mail. If you get an erroneous electronic bank draft charge on your bank statement, you have 60 days to contest it and have funds returned. This is a very safe and inexpensive system. Our system charges $0.25 cents for each electronic check. Compare that to the costs of handling a physical check received in the mail or church offering plate. There is no comparison, plus the giver saves a stamp if the check is normally mailed.
Giving Through Credit/Debit Cards
Credit and debit cards are payment vehicles produced by private companies (Visa, Master Card, Discover and American Express). This is called the Merchant Account business. It is a hard sell and confusing business for the “merchant” to understand much less a ministry. Card fees include a transaction fee (ours is $0.25 cents) plus a percentage (the Interchange) ranging from 1.39% for a Visa Debit card (which debits the giver’s checking account) all the way to an AMEX premium card at 3.95% or even more (e.g. the Costco Amex card).
In addition, Premiums are the consumer benefits that cause you to be motivated to use your credit card (think air miles or kickback points), but the Premium has to come from somewhere, and that is the store owner, or in your case, the ministry. The ministry pays for the use of that card by the giver. You could lose $40 on a $1000 AMEX gift. In our system the average Visa/MC charge on the interchange was 2.45%, which included the Debit and Credit card versions of Visa/MC last year. So for every $1000 in card giving through Visa/MC, our ministry clients paid $24.50 for the privilege. Another cost to consider is returned charges if a giver challenges the gift. I personally think credit cards should be avoided for stewardship whenever possible.
ACH (Checking) Is Preferred
We personally coach ACH (debits from a giver’s checking account) for giving preferences ($0.25 per check with no additional percentage fee) as proper Kingdom stewardship. Besides, when focusing on recurring giving to strengthen para-church funding, you are not dealing with disappearing gifts from hacked card replacements, dates expiring and givers switching to different premium cards and forgetting to tell you. Maybe they took a Dave Ramsey class, cut up the credit cards and spaced out on telling you. The gift suddenly disappears. When that happens, see if you can convert the giver to giving through their checking account.
It is best to create a stewardship culture preferring ACH (debits from a giver’s checking account). Your givers will appreciate the integrity. Just say “if you can use your checking account, all your gift goes to the ministry.”