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Not many people think about the transaction fees nonprofits pay (such as PayPal fees on donations, for example). We know, shocking.
But it’s a surprisingly big (and by big, we mean pricey) topic. So, to get the conversation started, we’ve put together this article that dives into the costly realities nonprofits face and the hidden world of transaction fees.
What’s in this article:
What are transaction fees?
Why are nonprofits (or anyone else) charged transaction fees?
How much do transaction fees cost nonprofits every year?
What’s the solution? (Yes, there is one. Hint: it’s Zeffy. We’re the only fundraising platform for nonprofits that don’t pass along transaction fees to our partners.)
What are transaction fees or “per-transaction fees”?
Let’s get right to the point: a transaction fee is an amount of money that a business or organization (nonprofit and for-profit) pays every time it processes an electronic payment for a customer’s transaction.
The transaction fee varies depending on the organization's service or payment processor. It can be charged as a percentage of the transaction amount, a fixed amount, or often both.
For example: If you donate to your favorite charity, the transaction fee will probably be between 2% and 3%. Credit card processing fees range from 2.87% to 4.35% on average, while wire transfers and Interac payments can reduce it slightly, dipping as low as .5%.
Transaction fees can also resemble percentages plus an additional flat charge (like Stripe fees of 2.9% + $0.30 per charge). In that case, a donation of $100 will cost around $3.20, and only $96.80 will be donated to the organization.
That may not seem like a lot, but it adds up quickly. And every dollar wasted on transaction fees is a dollar that’s not invested in the nonprofit and their cause. This is a big reason why Zeffy is committed to being the only fundraising platform for nonprofits that is 100% free. Zero transaction fees. Zero platform fees. Zero monthly fees.
Why are nonprofits charged transaction fees?
It all comes down to middlemen (and yes, more than one). The business or organization is charged a transaction fee when you pay for something or donate to a charity using a debit or credit card.
The transaction fee is the sum of two or more fees shared between the bank or payment platform (called the merchant service provider) and the credit card company. Here’s a breakdown:
The merchant service provider
A merchant service provider (MSP) helps businesses accept credit cards, debit cards, and digital payments by handling the processing behind the scenes. They charge transaction fees (usually a smaller percentage + a flat fee) to cover bank fees, security, and fraud protection. They ensure payments go through smoothly and safely, so businesses get paid and customers can shop hassle-free.
The credit card company
A credit card company gives you a card to buy things now and pay later. They make money in a few ways—interest if you don’t pay your entire balance, fees for things like late payments, and transaction fees from businesses every time you swipe. They also handle security and perks like rewards, making spending easier while managing the risks of lending money.
“Card companies charge merchants a percentage of the transaction, averaging a little over 2% but sometimes as high as 4%, to process the payment.” We know that at least 70% of this amount goes to the issuing bank, so the payment service provider might receive a maximum of 30%.
This split varies depending on the merchant service provider, country, credit card type, how many transactions you process, and whether or not you’re a nonprofit. Larger companies and nonprofits typically pay lower transaction fees—savings that fundraising platforms rarely pass on to their clients.
Simply put, transaction fees are one of the ways financial services providers make money. And yes, they make money off of everyone—nonprofits included.
How much do transaction fees cost nonprofits every year?
Depending on how you calculate your calculations, nonprofits spend around $1.43 billion a year on transaction fees—the how is a little trickier to explain. But we’re going to do our best.
“Fundraising technology is critical to nonprofits’ success but eats up too much of the funds they need to raise,” said François de Kerret, Zeffy’s CEO and co-founder. “We fixed this vicious circle by providing tools that allow nonprofits to keep every dollar their donors pledge, which lets them focus on their mission and direct more funds to those in need.”
Transaction fees in the United States cost nonprofits $1.42 billion
Regarding the US, giving was predicted to increase by 4.2% in 2024, followed by an additional 3.9% increase in 2025. We see that 5.7% of the United States GDP comes from nonprofits, and U.S. charitable giving totaled $557.16 billion in 2023.
About 60% of Americans give to charity annually, and 54% of donors prefer to give online with a credit or debit card. In 2022, online giving sat at around $44 billion.
If we apply the 3% transaction fee to the $44 billion in online donations just in 2022 alone we can see the impact of $1.32 billion in transaction fees that land on U.S. nonprofits.
If we do one last quick calculation and multiply the ~200 million US citizens who donated in 2023 (60% of the total US population, 334,914,895) by an average fee of $0.52 per transaction, we’ll see a total cost of $104 million.
Transaction fees in Canada cost nonprofits $15 million per year
In 2022, nonprofits in Canada generated 8.2% of the country’s gross domestic product (GDP), or $216.5 billion. In 2023, the most prominent revenue sources were individual donations (21.7%), membership fees or dues (17.7%), and transfers by provincial or territorial governments (10.5%).
Not everyone donates online, and Canadian data on this is hard to find. Online giving through CanadaHelps saw an increase between 2020 and 2022, around 6%. They also observed that the number and value of online donations made through CanadaHelps have doubled from 2019 to $430 million in 2023.
If we take that $430 million alone and subtract 3% in transaction fees, we realize that even a small subset of nonprofits spend ~$12.9 million on transaction fees each year.
In 2022, just under 5 million Canadian tax filers reported making charitable donations. If we do one last quick calculation and multiply that number by an average fee of $0.52 per transaction, we get $2.6 million. And that’s just in Canada.
Annual transaction fee estimate: $12.9 million + $2.6 million = $15.5 million
The impact of these high transaction costs
As 2024 totals become clear with tax season coming to an end around mid-year 2025, we expect to see these numbers increase.
We’re working hard to be as transparent as possible about the numbers. But as usual, that's easier said than done regarding numbers and financials.
We can confidently estimate that the combined transaction fees paid by nonprofits in Canada ($15.5 million) and the U.S. ($1.42 billion), along with a small allowance for the percentage of Canadians who donate via credit card, brings the total to approximately $1.43 billion in transaction fees across North America.
What can $1.43 billion buy? Here are some estimates:
14 million custom hockey jerseys
2,300 kilometers of paved bike paths
143 million children's books
57,200 years of university tuition in Canada
2 million hours of teen helpline support
476 million children’s breakfasts
9,500 homes for families
28 million trees planted
47 million people provided with clean drinking water
5 years of medical research funding for diseases like cancer
19 million laptops for students
19,000 small businesses supported with $50,000 grants
How to save on transaction fees
Find fundraising platforms or service providers that charge lower fees
Many merchant service providers, such as PayPal and Stripe, offer discounted nonprofit rates for qualified organizations. For example, instead of PayPal’s usual 2.9% + $0.30, they charge 2.2% + $0.30 per transaction and waive the monthly fee for charities. These discounts may not seem like much, but they can add up quickly and help nonprofits maximize each donation.
Ask your donors to help cover the cost
When most of us donate or purchase, we probably think of what it’s costing us and maybe even the good it will do the organization. We probably don’t think about how much of a cut the banks that issued our credit cards are taking, and it’s even less likely we think of the percentage the merchant service provider or fundraising platform is taking.
This is where education comes in. The more people know, the more likely they are to relate and want to help. Nonprofit organizations can educate their donors on the costs of using their credit cards and ask them to cover the transaction fees when they give.
Evaluate fundraising platforms
Zeffy is founded on the fact that we are the only 100% free fundraising platform for nonprofits. We even pay the transaction fees for you. There are no platform fees, credit card fees, monthly fees, or exceptions.
However, other platforms offer nonprofit pricing. Some online fundraising platforms charge lower fees than others, and most charge additional fees to access their more interesting features. We should do some research to find the best option for your nonprofit.
Eventbrite for nonprofits
Eventbrite pricing for nonprofits is among the most expensive. We suggest looking for Eventbrite alternatives and reducing the transaction and platform fees you pay for your fundraising events.
Classy donates 1% of its revenue to the nonprofit sector and, like Zeffy, is a Certified B Corp. Classy’s pricing model isn’t exactly transparent. Still, they charge a 4% transaction fee plus a yearly fee to use their platform.
Network for Good’s pricing model varies depending on the size of your nonprofit and how you plan to use its platform. Transaction fees are between 3% and 5%; additional platform fees are charged for some features.
Things to keep in mind before you choose a fundraising platform
Do some quick calculations to see how much the fundraising platform will cost/save your nonprofit. Transaction fees are part of the cost, but most platforms also charge platform fees for more advanced features, such as online event ticketing.
Look into the hidden fees. Most platforms will claim to be “free” because they don’t include fees charged by third-party merchant service providers like Stripe. Read more about avoiding the hidden cost of free software for nonprofits.
Consider the features they offer (event management for nonprofits, fundraising ticket templates, peer-to-peer campaigns, etc.) and compare them to the features you actually need.
