What is Donors Cover Fees?
Donors Cover Fees is a common strategy used by many nonprofit organizations to help cover the costs of online donation software and payments. Most often, this is a checkbox that encourages donors to increase their contribution amount to cover fees. The goal of organizations that use this strategy is to reduce the expenses of online fundraising by asking donors to chip in towards that cost.
Funraise's Donors Cover Fees model provides an effective Funraise platform fee of 0% for qualified transactions because Funraise only charges a platform fee when the donor opts in to cover fees. When the donor opts out of covering fees, Funraise does not charge a platform fee. Easy.
This model is not only popular with nonprofit organizations — Donors have also shown that they are happy to chip in. With Funraise, about 90% of donors cover fees. This saves your organization on software and processing costs because when donors cover fees, they cover the entire Funraise platform fee and a portion of processing fees.
In a nutshell
When a donor covers fees, Funraise assesses up to 5% for the platform fee.
When a donor does not cover fees, Funraise does not assess a platform fee.
When a donor covers fees, they cover Funraise's platform fee and a portion of processing fees.
What are Transaction Fees?
Whether it's processing fees from your processor or platform fees from your fundraising platform, fees incurred with online payments are necessary to maintain the security and performance of online payment infrastructures. With online payments, you can incur two fees: processing and platform fees. When a donor covers fees, they cover the entire platform fee and a portion of the processing fees.
Processing fees are required for online transactions because payment networks (Visa, MasterCard, etc.) charge the merchant (your organization) a fee to use the network. Processing fees can vary depending on the processor. Funraise Payments powered by Stripe enables 2.9%+30¢ for cards and 0.8% ($25.00 cap) for ACH payments.
Funraise platform fees cover the cost of the software. Funraise's Donors Cover Fees model provides an effective platform fee of 0% because Funraise only charges a platform fee if the donor covers the fee. When a donor covers fees, Funraise assesses up to 5% for the platform fee. When a donor does not cover the fee, Funraise does not charge a platform fee.
How it works — on the Giving Form
Donors can review their payment details and edit their fee coverage as a final step in the donation process. By default, fees are covered.
When a donor clicks to edit their fee coverage, they can learn more and increase or decrease their fee coverage. Donors can also slide down to 0% to opt out of fees entirely.
Where do the fees go?
It's as simple as that. Fee coverage is defaulted at 8%. The actual amounts received by both Funraise and your organization will be based on the amount chosen by the donor.
Here are the possible outcomes:
In the case where a donor does not adjust the fee amount and chooses to add the default 8%, Funraise will first assess 5% as the platform fee and your organization will receive an additional 3%. This 3% received by your organization is an increase over Funraise's previous model and, for most organizations, closer to your average processing fees.
In the case where a donor decreases their fee coverage, Funraise will first assess up to 5% as the platform fee and the remainder will be received by your organization.
In the case where a donor increases their fee coverage, Funraise will first assess 5% as the platform fee and the remainder will be received by your organization. Funraise's updated model ensures that any fee coverage amount over 5% is received by your organization.
In the case where a donor decreases their fee coverage to 0%, Funraise will not assess a platform fee. Keep in mind, processing fees will always be charged.
The tables below show a common example of a $100 donation with Funraise Payments powered by Stripe and Donors Cover Fees where the donor covers the default fee amount. Keep in mind, other payment processors, like PayPal, have their own processing fees.
Donor Covered Fees?
Funraise Platform Fee
Donor Covered Fees?
Funraise Platform Fee
Good to know
Donors Cover Fees does not apply to all Transactions
In the following cases, a donor does not have an opportunity to opt in or out of covering fees so Donors Cover Fees does not apply. When Donors Cover Fees does not apply to a Transaction, your contracted Platform Transaction Fee or a base Platform Transaction Fee of 2% for enterprise plans and 3.5% for free plans will be assessed.
Historic subscriptions — Transactions from recurring subscriptions created before the activation of this feature.
Migrated subscriptions — Transactions from recurring subscriptions that were migrated to Funraise.
In-person donations (Funraise App) — Transactions created through Funraise's App.
Subscriptions created in platform — Transactions created through Subscriptions that have been manually created in the back end of the platform.
Subscriptions created in the Giving App — Transactions created through Subscriptions that have been created by a donor in the Giving Portal mobile app.
Commitment payments — Transactions created to fulfill a fundraising commitment.
Form V1 Transactions — Transactions created through Funraise's Form V1 (legacy form).
Operations Tip is not compatible with Donors Cover Fees
Funraise's Operations Tip is a legacy feature often used for a similar purpose as Donors Cover Fees. Operations Tip is no longer available on Giving Forms with Donors Cover Fees. Historic Operations Tip data will still be available in the platform.