The Case for Recording Credit Card Transaction Fees

By: Sheela Nimishakavi, MA, MPH

These days accepting credit card donations or payments online, and paying the associated transaction fees, is an unavoidable cost of doing business. When tracking these payments in the books, many nonprofit organizations will only record net income as opposed to recording gross income and expensing the transaction fee. This under-reports both income and expense by the same amount, so what’s the big deal?

Well, to start with, it is simply inaccurate bookkeeping. Only recording net income ignores an entire expense category that your organization incurs regularly. As nonprofits accept more gifts through credit card and less through cash and check, this ignored expense category will become a more significant portion of the budget.

Further, it understates the value of a donor’s gift, which is particularly troublesome for organizations that use their accounting software as their donor database. People generally don’t donate $97.38- the true gift was probably $100 and should be recorded as such. If the books have the wrong value recorded, does that mean that the acknowledgement letter going out to the donor also reflects the wrong gift amount?  Further, many sites will allow donors to increase the amount of their gift to cover the transaction fee. Thus, the true value of the gift includes the additional couple dollars and change for the transaction fee, and the thank you letter should reflect that.

Finally, as credit card processing sites compete with each other for business, the cost of transaction fees will, hopefully, decrease. If your organization does not track how much you spend on fees, how will you know if a better value comes around?

It may seem like a small charge when you look at each individual transaction, but these charges add up- quickly! Keep your books in good shape and don’t ignore transaction fees. Feel free to reach out to ThirdSuite for any help!

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