Understanding Merchant Fees and Fee Coverage

Understanding Merchant Fees and Fee Coverage

Merchant Fees Overview

When processing transactions, fees are charged to cover payment processing and ensure secure, seamless transactions.

Breakdown of the fee structure:

1. Credit/Debit Card Transactions
  1. Fee: 2.99% of the transaction amount + $0.30 per transaction.
  2. Example:
  3. Transaction Amount: $100
  4. Fee Calculation:
  5. 2.99% of $100 = $2.99
  6. Fixed Fee = $0.30
  7. Total Fee: $2.99 + $0.30 = $3.29
  8. Net Amount Deposited: $100 - $3.29 = $96.71

2. ACH (Bank Account) Transactions
  1. Fee: Flat $0.50 per transaction, regardless of the amount.
  2. Example:
    1. Transaction Amount: $100
    2. Fee: $0.50
    3. Net Amount Deposited: $100 - $0.50 = $99.50

What Happens When Donors Choose to Cover the Fee?

When donors choose to cover the fee, they agree to pay 3% of the transaction amount (rounded up). While this covers most of the actual fee, there may still be a minor difference between the fee the donor covers and the final processing fee.

Fee Coverage Example (Credit/Debit Card)

1. Donor’s Intent: The donor wants to give $100 and chooses to cover 3% of the transaction amount.

2. System’s Calculation:
  1. Fee Covered by Donor:
  2. $100 × 3% = $3.00
  3. Gross Donation Amount = $100 + $3.00 = $103.00

3. Actual Fee Calculation (2.99% + $0.30):
  1. 2.99% of $103.00 = $3.08
  2. Fixed Fee = $0.30
  3. Total Fee = $3.08 + $0.30 = $3.38

4. Final Outcome:
  1. Donor pays $103.00.
  2. Fee deducted: $3.38.
  3. Net Amount Deposited: $103.00 - $3.38 = $99.62.

Fee Coverage Example (ACH Transaction)

1. Donor’s Intent: The donor wants to give $100 and chooses to cover 3% of the transaction amount.

2. System’s Calculation:
  1. Fee Covered by Donor:
  2. $100 × 3% = $3.00
  3. Gross Donation Amount = $100 + $3.00 = $103.00

3. Actual Fee Calculation: Flat Fee = $0.50

4. Final Outcome:
  1. Donor pays $103.00.
  2. Fee deducted: $0.50.
  3. Net Amount Deposited: $103.00 - $0.50 = $102.50.

Why Is There Still a Fee When Donors Cover It?

The donor’s “cover fee” selection applies a flat 3% to the transaction amount, which is slightly lower than the actual processing fee for credit/debit card transactions (2.99% + $0.30). The difference between the covered amount and the actual fee is deducted from the gross donation.


Deposit Amounts and Reconciling Fees

If you receive a deposit where the fee doesn’t match expectations:
1. Donor Chose to Cover 3% Fee:
  1. The 3% coverage may not fully account for the actual 2.99% + $0.30 fee.
  2. Example:
    1. Donor covers 3% = $3.00.
    2. Actual fee = $3.38.
    3. $0.38 is deducted from the donation amount.

2. ACH Transactions:
  1. If the donor covers 3%, this exceeds the flat $0.50 fee.
  2. Any excess contributes to the deposit amount.

How to Achieve an Effective Rate Under 1% with SteepleMate

With SteepleMate, you can easily achieve an effective transaction rate under 1% by encouraging your donors to give through ACH (bank account) payments. ACH transactions are charged a flat $0.50 fee, meaning donations over $50 result in an effective rate below 1%. For example, a $100 ACH donation incurs only a 0.5% effective rate. By promoting ACH for larger gifts, you can maximize savings while ensuring more of each donation directly supports your ministry.

Info
*An “effective rate” is the average cost of processing transactions, calculated as total fees divided by total transaction volume. 

Ready to optimize your giving strategy? SteepleMate makes it simple and cost-effective!


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