Published 2010, with fee update in 2015. Merchant services for political campaigns tend to cost more than for retail merchants. Why? The main reasons are their lack of knowledge about the subject and then all the other reasons. Other reasons include how payment is collected, the types of cards presented, and the credit card processing price plans they are on. Below I’ll address each issue in brief.
First their lack of knowledge makes it easier for other companies to charge them more money. Think used car salesmen 25 years ago. Small campaign races will generally pay more than big races because there is little to process. This is simply an ROI issue just like with small businesses. But what about the bigger campaigns?
How do politicians collect money for campaign contributions? The most popular are checks in the mail, donor cards collected at speaking events (check or credit card which is key entered later), and online donations. The donor card exposes the politician to substantial risk. Where are the cards stored while traveling from one event to the next? Who opens the mail? Who keypunches the data? What kind of training have they had in protecting card data? Do you perform background checks on volunteers who see donor cards?
- Reduce risk by keypunching data into a virtual terminal on site.
- Reduce risk and cost by attaching a card reader to a computer or mobile reader with P2PE encryption. You’ll save about 0.5% by swiping vs key entering.
- Always securely shred card data upon completion of transaction. With a well-developed donor form, you can detach or cut off the credit card data while still keeping critical information on the form such as payment amount. Record the authorization number and date processed on the form for your records.
Costs are affected by the type of card presented for payment. You can’t control this. But you also need to know the merchant services game because this is a big gotcha. In my experience, the card type can relate to the type of race; the bigger dollar donors use rewards or corporate cards. Campaigns targeting smaller donations attract a high amount of debit cards, up to 50%. Here’s the big catch on merchant agreements- QUALIFIED RATE. Chances are 80% of cards presented will never hit the qualified rate. So what’s your non-qualified rate? What’s your best rate for corporate cards for a MOTO merchant account? (Interchange is 2.2% plus $.10 per transaction. )
Common Visa interchange rates for reference: RETAIL= swiped card. MOTO = mail order or phone order. Ecommerce rates are the same, but account set up and rules are different. Below is a very small list of the 500 or so possible interchange rates. We see every day on merchant accounts.
- regulated debit/check card, swipe .05% plus $.22 per transaction
- regulated debit/check card, MOTO .05% plus $.22 per transaction
- credit card, swipe 1.79% plus $.10 per transaction
- rewards card, MOTO 1.95% plus $.10 per transaction
- Commercial card MOTO 2.2% plus $.10 per transaction – COMMERCIAL CARDS should not be accepted because they’re issued to businesses
Non-qualified downgrade costs can be nearly 1%, and remember, these are interchange costs. Your fees will be higher.
Credit card processing price plans vary widely for this industry, but in general, are much higher than others. That’s not because the raw costs are higher, its because the payment processors take bigger profits. Remember what I said about the used car salesman. Credit card processing is not the core skill of the average politician and it may not be for the finance manager either. One of the most valuable assets of a politician is their time. Therefore they tend to copy what others in their party are doing, or simply look for the easiest solution that solves many of their time issues.
Ecommerce solutions for politicians are plentiful as they are for non-profits. I have no problem with payment processing costs being higher than average if you get a robust software package at no cost. Companies have to recoup their investment somewhere. But what if you pay for the software and the payment processing?
Let’s look a little deeper into an example such as Click & Pledge. It has lots of cool features to manage donors and build an online community. They also have an integrated payment processing solution option. I had to read several sections a few times, and based on what I read, I’m still not sure. Can you use their other features but not the payment processing? They have API section which looks like a yes, but the non-existent comments in the forum make me wonder.
Their rates are among the highest I’ve seen at 4.5% and $.35 per transaction. But wait- that’s not for all cards. “Visa & MasterCard may add additional fees for affinity and cards which earn points. These cards are referred to as non-qualified cards and typically have 1% surcharge associated with them. The fees are not being charged by Click & Pledge and we have no control over which cards will be charged as a non-qualified card.” So merchants can expect to pay up to 5.5%. Basically they’ve locked in at least 2% profit (also known as 200 basis points) by my estimation, and that’s very high in today’s marketplace.
Two percent is about double the norm for a small business from what I’ve seen, although that market is not my specialty. Maybe solutions like this are still a good fit for your campaign. But before you buy, ask if you’re allowed to use your own merchant account. In most cases you’ll do better far on price and there are other benefits as well. For example, if I were managing your account, I’d make sure you had the right type of merchant accounts for different situations to meet Visa and MasterCard regulations. You’ll get advice and handouts for volunteers on proper data security. We can assist with your check processing, including remote deposit capture. We can assist with payment type and provide risk management advice to help protect you against embarassing data security breaches.
Keep more money from your online donations. Get a merchant account separate from your software or web host.