How to Get Merchant Account for Nonprofit Organizations
Overview
A merchant account for a nonprofit organization allows charities, religious institutions, and other nonprofit groups to accept credit card payments and donations online or in person. In today’s digital world, offering multiple payment options makes it easier for donors to contribute.
Setting up a merchant account for a nonprofit may seem challenging, but it can be a smooth process with the right information. This guide by Academic Block will explain how to get a merchant account for a nonprofit organization, including the benefits, requirements, and steps involved.
What Is a Merchant Account?
A merchant account is a unique banking account that enables organizations to handle credit card, debit card, and online payments. It serves as an intermediary between the donor’s bank and the nonprofit’s bank, facilitating secure and efficient transactions.
A nonprofit merchant account comes with lower transaction fees and special benefits designed to support charitable activities. When a donor makes a contribution, the payment first goes to the merchant account before being transferred to the nonprofit’s bank account. Having a merchant account ensures secure and efficient processing of donations while helping nonprofits maintain financial transparency.
Why Nonprofits Organizations Need a Merchant Account
A merchant account can greatly benefit nonprofit organizations in several ways:
Benefits of a Merchant Account for Nonprofit Organization
Having a merchant account offers several advantages, including:
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Accept Online Donations Easily : A merchant account enables nonprofits to accept credit/debit card payments, online donations, and recurring contributions via websites, mobile apps, and social media.
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Increase Fundraising Opportunities : By providing multiple payment options like Apple Pay, Google Pay, PayPal, and credit cards, nonprofits can attract more donors and boost contributions.
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Lower Transaction Fees for Nonprofits : Many payment processors offer discounted processing rates for registered 501(c)(3) organizations, helping nonprofits save money.
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Build Trust and Credibility : Having a secure and reliable payment processing system reassures donors that their contributions are safe and directly benefiting the cause.
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Automate Recurring Donations : A merchant account allows nonprofits to set up monthly recurring donations, making it easier for supporters to contribute regularly.
Requirements for Opening a Merchant Account for a Nonprofit Organization
To apply for a merchant account, nonprofits must meet certain requirements. Here’s what most payment processors and banks will ask for:
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Proof of Nonprofit Status : Nonprofits need to provide official documentation proving their tax-exempt status, such as:-
- IRS 501(c)(3) determination letter (for U.S. organizations)
- Articles of incorporation
- Business registration details
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Bank Account for the Nonprofit : A dedicated business bank account is required to receive funds from the merchant account.
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EIN (Employer Identification Number) : Most merchant account providers require an EIN, which is a unique number assigned to nonprofit organizations by the IRS.
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Website with Donation Page : A nonprofit should have an official website with a donation page. This page should include:-
- Clear mission statement
- Contact details
- Secure payment options
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Financial Statements : Some providers may request financial records to verify the organization’s stability.
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Processing Agreement : The nonprofit must agree to the merchant account provider’s terms and conditions, which outline fees, chargebacks, and refund policies.
Required Documents
Donation Page Includes
Step-by-Step Guide to Getting a Merchant Account for a Nonprofit Organization
Step 1: Register as a Nonprofit Organization
Before applying for a merchant account, your organization must be officially registered as a nonprofit with the government.
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In the U.S., this means obtaining 501(c)(3) tax-exempt status from the IRS.
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In other countries, nonprofits must comply with local regulations.
Step 2: Open a Business Bank Account
Most merchant service providers require nonprofits to have a business bank account where funds from donations will be deposited.
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Choose a bank that offers low fees and nonprofit-friendly services.
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Keep the bank account name the same as the nonprofit’s legal name to avoid delays.
Step 3: Choose the Right Merchant Service Provider
There are several merchant service providers that cater specifically to nonprofits. Here are some top options:
Top Merchant Account Providers for Nonprofits:
When choosing a provider, consider:
- Transaction fees
- Integration options (website, social media, crowdfunding platforms)
- Recurring donation capabilities
- Customer support
Step 4: Gather Required Documents
When applying for a merchant account, you will need to submit the following documents:
- Proof of nonprofit status (IRS 501(c)(3) determination letter)
- EIN (Employer Identification Number)
- Business bank account details
- Articles of Incorporation or Organization
- A voided business check
- A list of board members and authorized signers
Step 5: Apply for a Merchant Account
Once you have gathered the necessary documents, apply online with your chosen merchant service provider. The application process usually takes a few days to a couple of weeks.
Step 6: Integrate the Payment Gateway
After approval, you’ll receive merchant account details and instructions to set up a payment gateway.
- If you have a website, integrate the payment processor using their API or plugins.
- If you collect donations in person, set up card readers or POS systems.
Step 7: Start Accepting Donations
Once the setup is complete, start promoting your donation links via:
- Website donation page
- Email campaigns
- Social media platforms
- Fundraising events
Tips to Maximize Donations with a Merchant Account
Tips for Reducing Transaction Fees in Merchant Account as NGOs
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Look for Nonprofit Discounts : Some providers offer discounted rates for 501(c)(3) organizations. Always ask about nonprofit pricing.
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Encourage ACH Transfers : ACH (bank-to-bank transfers) often have lower fees compared to credit card payments.
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Ask Donors to Cover Processing Fees : Many donation platforms allow donors to opt-in to cover transaction fees, maximizing the amount your nonprofit receives.
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Use Fundraising Platforms with Lower Fees : Platforms like Donorbox, Zeffy, and Fundly charge lower fees compared to traditional merchant accounts.
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Negotiate with Payment Processors : If your nonprofit processes high donation volumes, you may be able to negotiate lower fees with your merchant account provider.
Final Words
Getting a merchant account for a nonprofit organization is essential for accepting credit card payments, recurring donations, and online contributions. By choosing the right payment processor, understanding the requirements, and following the right steps, nonprofits can simplify their fundraising efforts and reach more donors. When setting up your merchant account, compare fees, look for nonprofit discounts, and choose a provider that aligns with your organization’s needs. Hope you liked this article by Academic Block, please share your thoughts below in comment section to make this article better. Thanks for Reading!
This Article will answer your questions like:
Non-profit organizations should establish a dedicated savings account tailored for trusts or NGOs. For instance, Axis Bank offers Trust/NGO Savings Accounts with features like unlimited free banking transactions, cash management services, and salary disbursement solutions for staff members. This ensures efficient financial management and compliance with regulatory requirements.
Non-profits can accept payments through various channels, including online payment gateways, bank transfers, and mobile payment solutions. Collaborating with banks that offer specialized services for NGOs, such as Axis Bank’s collection solutions like Easy Pay Online, EDC Machines, and Payment Gateway, can streamline the donation process and enhance donor convenience.
While completely free payment processing services are rare, some providers offer discounted rates for non-profits. It’s essential to research and compare various payment processors to find the most cost-effective solution that aligns with the organization’s financial capabilities and operational needs.
Yes, non-profit organizations can obtain credit cards to manage expenses and streamline financial operations. Many financial institutions offer credit card solutions tailored for non-profits, providing benefits such as expense tracking, rewards, and flexible payment options. It’s advisable to consult with banks to explore available options that suit the organization’s financial requirements.
The “33% rule” refers to a guideline suggesting that a non-profit should secure at least one-third of its revenue from public support to qualify as a publicly supported organization. This ensures a broad base of public financial backing, which is crucial for maintaining tax-exempt status and demonstrating community support.
PayPal offers discounted transaction fees for registered non-profits, but it’s not entirely free. Non-profits can benefit from reduced rates on donations received through PayPal, making it a cost-effective solution for online fundraising. It’s important to review PayPal’s current fee structure to understand the applicable charges for non-profit organizations.
The optimal payment processor for non-profits depends on specific needs, such as transaction volume, donor demographics, and budget constraints. It’s advisable to evaluate various processors based on fees, integration capabilities, and support services to determine the best fit for the organization’s fundraising strategies.
Obtaining a completely free merchant account is uncommon; however, some providers offer reduced fees or special rates for non-profits. It’s essential to research and negotiate with payment processors to secure favorable terms that align with the organization’s financial resources and operational needs.
Yes, non-profit organizations can utilize Square to accept donations and process payments efficiently. Square offers features like donation buttons, checkout links, and a free mobile card reader, facilitating seamless transactions for fundraising events and daily operations. However, it’s important to note that Square does not provide discounted fees for non-profits; standard transaction rates apply. Non-profits should assess their specific needs and compare options to determine if Square aligns with their financial strategies.
Non-profits have several online payment systems to consider, each offering unique benefits. PayPal is widely recognized, assisting over a million non-profits with fundraising and offering discounted transaction rates for verified 501(c)(3) charities. Stripe provides integrated payment solutions with competitive rates, suitable for organizations with robust online platforms. Square is ideal for point-of-sale transactions, especially during events. Evaluating factors like transaction fees, ease of integration, and donor experience will help determine the best fit for a non-profit’s specific needs.
The timeline for obtaining a merchant account for a non-profit organization varies based on the chosen payment processor and the organization’s preparedness. Typically, the process can take anywhere from a few days to a couple of weeks. Ensuring all necessary documentation, such as proof of non-profit status, bank account details, and organizational information, is readily available can expedite the approval process. It’s advisable to consult directly with the payment processor to get a precise timeline.
For small non-profits, selecting a merchant account provider that offers cost-effective solutions is crucial. PayPal is a well-recognized processor that assists over a million non-profits annually, offering discounted transaction rates for verified 501(c)(3) charities. Stripe provides integrated payment solutions with competitive rates, suitable for organizations with robust online platforms. Evaluating factors such as transaction fees, ease of integration, and donor experience will help determine the best fit for a small non-profit’s specific needs.
Non-profits can accept credit card donations without a traditional merchant account by utilizing third-party payment processors like PayPal or Square. These platforms allow organizations to process donations without the need to establish a separate merchant account, simplifying the setup process. However, it’s important to consider transaction fees and ensure the chosen solution aligns with the organization’s financial and operational requirements.
Not all merchant accounts impose monthly fees; the fee structure varies among providers. Some payment processors offer plans without monthly charges, instead applying per-transaction fees. Others may have monthly fees but offer lower transaction rates. Non-profit organizations should assess their transaction volume and financial capabilities to select a merchant account provider with a fee structure that aligns with their budget and operational needs.
Establishing a merchant account for a non-profit involves several key steps. First, research and select a payment processor that offers services tailored to non-profits. Gather necessary documentation, including proof of tax-exempt status, organizational details, and bank account information. Submit an application to the chosen provider, ensuring all information is accurate and complete. Upon approval, integrate the payment processing system into the organization’s donation platforms, enabling the acceptance of credit card donations seamlessly.