Checks Still Dominate Donation Transactions, Despite High Cost for Small Gifts

Title: Understanding the Costs of Charitable Giving

Organization: PayPal

Summary: The size of a donation determines which payment method is most cost-effective for nonprofit recipients, according to a new study about the monetary and labor costs associated with charitable-giving transactions. For $100 donations from new donors, checks are the most cost-effective; for $50 gifts, online and mobile payment systems, or “digital wallets”; and for $25 donations, credit cards.

PayPal, which considers itself a digital wallet, conducted the study with assistance from GuideStar. Information came from the federal Bureau of Labor Statistics and a survey of nearly 1,000 U.S.-based charities. PayPal calculated monetary costs including equipment, postage fees, per-transaction fees, and labor costs, including staff time.

Among the findings:

• For donation payments, 98 percent of charities accept checks, 92 percent accept cash, 73 percent accept credit cards, 59 percent accept digital-wallet transactions, and 14 percent accept payments from third-party platforms, such as texting programs or Facebook interfaces.
• Among respondents, 44 percent of all donations come via check, 22 percent via credit card, 21 percent via digital wallet, and 13 percent via cash.
• As donation amounts increase, labor costs stay nearly stable, but transaction-fee costs increase for gifts made via credit card or digital wallet. Checks have the highest labor cost, which is why they are less cost-effective for smaller donation amounts.
• For a charity to accept a single $100 donation by a first-time donor, processing a check costs $3.61; a credit card costs $4.25; and a digital wallet costs $4.15.
• A $50 gift from a first-time donor costs $3.63 to process by check, $3.25 by credit card, and $3.15 by digital wallet.
• A $25, first-time donation costs $3.63 for a charity to process by check, $2.55 by credit card, and $2.60 by digital wallet.