Friday, August 12, 2011

Debit or Credit?

One of the major benefits of electronic giving is that it allows online donors to charge their gifts to credit cards, something they cannot do when they drop a check or cash in the collection box or on the plate during church service. Our Sunday Visitor’s (OSV’s) Online Giving option allows the donor to store any number of credit or debit cards in his/her account and charge gifts to the card instead of having the money taken out of their bank account. It costs the donor nothing to use the card. In fact, the donor stands to gain by charging the gift to a credit card as many of them offer incentives such as cash back, airline frequent flyer miles or some other form of reward. We have seen people charging gifts of $5,000 or even more to their credit cards. Those giving $5,000 to the church could get 1%, or $50, cash back as a “reward” from the credit card issuer. So they get the best of both the worlds.

For some of the churches accepting donations charged to credit cards has become a major issue. Pastors at these churches are concerned about the burden of credit card debt that many families are finding increasingly difficult to manage, especially in the current economic environment. They do not want their members to go into even deeper debt by charging gifts to the church on their credit cards. We have seen approximately 15% of the churches using our Online Giving not offering the credit card option to their members.  Before you decide to limit electronic giving to bank accounts only, you should consider the following:

1.    The use of debit cards is growing in popularity. These cards are issued by the banks and they are just like checks – money comes out of the card holder’s account as soon as it is charged to the card. In other words, there is no “float”. There is also no risk of the donor incurring debt on a debit card transaction as he/she cannot put off paying the charge over a long period. 

Generally the card holder does not have to pay for debit cards. In fact, some cards offer incentives similar to the credit cards although such incentives are being phased out by banks.
Use of debit cards is growing far more rapidly than that of credit cards. From 2000 to 2009, the volume of credit card transactions grew by 207% while that of debit card transactions grew by 650%. At the same time, number of checks declined by 57%.

2.    In our Online Giving, debit cards are treated the same as credit cards. The cost of a transaction is therefore the same regardless of whether the donor has used a credit card or a debit card. Allowing the church members to use their debit cards removes the stigma associated with credit cards and their effect on the debt burden to a family. 

3.    By not offering a credit/debit card option, the church misses a great opportunity to increase its collections and stabilize revenue stream. The churches offering both ACH and credit/debit card options find that credit/debit card donations are typically 7 to 10% higher than the ACH donations. Analysis of over 450,000 transactions we have processed to date confirms this fact. Of the transactions we have processed to date, 42.5% are credit/debit card transactions and they account for 44% of total donations processed. 

4.    Although the donor does not have to pay anything to charge his/her gift to the card, the church does pay for it. Fees for most credit cards are in the 2 to 3% range. American Express (AE) generally charges considerably higher fees than Visa, MasterCard or Discover. In addition to the transaction fee, AE is also likely to charge you a monthly fee. Beware of all these fees when deciding to accept AE cards. Visa, MasterCard and Discover generally charge the same amount, so it is safe to accept all three types. 

5.    OSV’s Online Giving option allows the donor to consider giving little more when he/she charges the gift to a credit card to help offset the fees the church has to pay. Adding another $3.00 to a one time gift of $100 or even higher may not mean much to the donor, but it will go a long way toward offsetting these fees to the church. 

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