Merchant account guide for churches and houses of worship

Merchant account guide for churches and houses of worship

"Cash or credit?" isn't a question you usually associate with a church, synagogue or other house of worship. But many congregations today have begun accepting credit cards to handle donations from members or are thinking about doing so.

It isn't a new phenomenon -- the Chicago Tribune ran an article about the practice back in 2002 -- but this payment method for church donations seems to be gaining momentum as we move toward an increasingly cashless society.

If your house of worship is thinking about taking plastic, passing around the offering plate won't be enough. You'll need to set up a merchant account to process the payments. Here are some guidelines.

Setting up a merchant account
Like any business that accepts credit or debit cards, you will need to find a merchant account provider. A merchant account is a bank account that lets you accept card payments. Merchant account providers, meanwhile, provide the technical support and infrastructure necessary for debit and credit card payments to get from the customer to the merchant account.

You can find a merchant account provider that provides support for various businesses. Or you can seek out one that specializes in nonprofit organizations or even houses of worship. Halo Merchant Services, for example, provides accounts for the Christian community, while Capital Processing Network offers a variety of tailored payment processing solutions -- including some for houses of worship.

In addition to helping you collect money, your merchant processor will be able to help you make sure your parishioners' card data is secure and that you are following appropriate security standards.

Reasons to accept plastic
Accepting card payments can have various benefits for houses of worship. For example, it makes recurring payments -- or "automatic tithing" -- easier. A church member can fill out a form at the church or go to a special Web page to set up a regular credit card payment to the church. Using this method, the congregant pays the church contribution just as he or she might pay electric or phone bills.

Some churches have programs and services like day care, preschool programs, bookstores or shops that benefit mission trips. They may therefore benefit from having credit card kiosks so church attendees can easily make their payments and contributions.

Churches with a young demographic might also want to explore the possibility of allowing members to make credit card payments from mobile devices.

What about fees?
It's a common complaint among merchants -- fees eat up the profits. The same holds true for church merchant accounts. Unlike cash donations, a certain percent of a card donation will go toward the card network, the bank and the upkeep of the merchant account itself.

Typically, merchants can expect to pay an array of set-up and maintenance fees, up to 25 cents in transaction fees, processing fees that range between 1 percent and 3 percent of the purchase and statement fees that can range from $5 to more than $20.

However, some merchant account providers do offer discounts on their fees to churches. Leaders Merchant Services, for example, has a special program for nonprofit fund-raising efforts, which includes church fundraising. It offers online processing with no set-up fee, a transaction fee of 17 cents and a processing rate of 1.99 percent for online or mail transactions and 0.49 percent for face-to-face swipes.

HolyProcessing.com (owned by Capital Merchant Solutions) offers a discount processing rate of 1.65 percent for in-person swipes (2.04 percent for online transactions), a transaction fee of 23 cents and a statement fee of $8.95.

In some cases, the discounts will amount to only pennies per transaction. Yet, like other nonprofit institutions, churches are facing tough economic times, and any option that lets them hold onto more donations can help them through. Compare merchant account providers to find the best deal for the volume of transactions you'll be processing.

Is a merchant account worth the costs?
If taking plastic costs extra, why not stick with the traditional offering plate? For one thing, churches that can rely on regular monthly credit card payments from members may find it easier to budget for programs and activities. They don't take a financial hit when their members don't come to services because they are ill, on vacation or stuck at home due to inclement weather. The churches also reduce the fees they pay due to members' bounced checks.

Credit cards may also bring in more money to the virtual offering basket. According to a white paper on online giving from Our Sunday Visitor Offertory Solutions, a church that lets members use both bank transfers and credit cards for giving will generally see between 40 percent and 45 percent of the donations charged on credit cards. What's more, an average credit card donation is generally 8 percent to 10 percent higher than that of a cash or check donation.

"This difference more than offsets the cost to the church of accepting credit card donations," the report reads.

Churches that have on-site credit card processing may also find it easier to collect money for special projects, natural disaster relief efforts or church dinners and other functions.

For church members, especially younger ones, charging their church donations simply makes sense because they pay for almost everything else with either credit or debit cards. Congregants who have rewards credit cards may also like earning airline miles or points on their donations.

Finally, donors to churches may find that credit card receipts come in handy at tax time because they have a record of their contributions. In addition, someone looking for extra deductions at year's end can make a donation via credit card and not have to actually come up with the money for a month or so. All these perks may encourage parishioners to give more.

Should churches be in the credit card business?
Some churches remain opposed to accepting credit card donations. Some cite scriptural references against high-interest lending, according to a 2010 Christianity Today article. Others don't believe that a house of worship should be encouraging their members to go into debt, especially if it means paying interest on contributions.

Some churches have therefore set up online donation sites to limit contributions to debit cards and automatic cash transfers from a member's bank account. Some that do accept credit cards make a point to also offer classes in budgeting and personal finance. They encourage members to pay off their credit card balances each month to avoid the interest charges -- and tell their members not to charge donations unless they have enough cash to cover the bill.

Published: June 26,2023