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charity donation help support charitable assistance concept

What Are Recurring Donations and Why Are They Good For Nonprofits? [2023 Update]

Nonprofit organizations have never been more popular. The average person donates hundreds of dollars to nonprofits each year. But the way people send money to these groups has changed, as most people donate to them by credit or debit card now.

The good news is that nonprofits can adapt to these changes in the industry by accepting recurring donations. These are donations provided to nonprofits that require regular funds for managing their missions and providing support for their causes.

A donor can sign up for a recurring donation program with a nonprofit. The person’s payments will be automatically removed from one’s credit card at the right times. The money will directly go to the nonprofit without having to use a third-party solution to manage the process.

Recurring Donation

How a Recurring Donation Works

A recurring donation uses a few steps to make it work:

  1. The nonprofit organization will set up a new program. It will provide different donation levels and frequencies for customers to choose online.
  2. The donor will set up an account on the nonprofit’s website. The donor will require the account to facilitate payments and to keep the donations within the website.
  3. The donor will select the specific donation option one wishes to follow.
  4. The person is then billed for the donation at the proper times. The donor is usually billed every month, but it can also be every quarter or year if desired.
  5. The person will continue to be billed until that someone decides to leave the program or that person’s payment method is no longer valid.

The nonprofit will need to provide the proper interface on one’s website to promote its recurring donation program. The system should be easy to review and read as necessary.

Provides Stable Revenue

The best part of recurring donations for nonprofits is that they provide stable revenue that these groups can trust. A nonprofit needs regular revenue to ensure it can stay operational. The funds can also help the nonprofit predict what it will receive each month, providing guidance for whatever operations or fundraising events the nonprofit wishes to run.

Reduce Operational Costs

Nonprofits often spend a while trying to find new donors. It also costs more to bring in new donors than it does to keep existing ones. By offering recurring donations, a nonprofit can get more funds from its existing donors. There’s less of a need for the nonprofit to promote itself or to look for grants or other things for help in keeping the operation running.

The operating costs remain cheap because the recurring donors will stay loyal to the nonprofit group. These donors may contribute additional one-time payments alongside their regular donations, especially if they respect the nonprofit group.

There’s no need to process checks, cash donations, or other things that might get lost. Regular donors will also feel comfortable knowing they’re automatically completing their donations online, as they won’t have to go through the same donation process every year.

No Third Parties Necessary

A recurring donation system also ensures all donations will go through a nonprofit’s website. The nonprofit doesn’t need to utilize a third-party donation site. These third-party websites might charge people for listing their nonprofits there. Some donors may also be turned off from using two different systems when getting through a donation platform. Keeping the data intact will be critical to its success.

Tips For Running a Recurring Donation Program

A recurring donation program can be a lifeline for any nonprofit group, although it works best when run well. There are a few tips a nonprofit can use when getting a program ready:

  • The nonprofit must have a set goal in mind. It can entail any amount of donors or donations, but it must be reflective of whatever projects the nonprofit wishes to run.
  • The nonprofit must plan its program based on the donors it wishes to target. The system can include donation values based on the approximate money amounts people are willing to part with each month.
  • All recurring programs should be marketed well based on the benefits involved with these donations. A nonprofit could promote that a specific monthly donation will provide a unique benefit that the nonprofit can carry out, for example.
  • A payment processor must help collect credit and debit card payments to make the recurring donation program easy to follow. It should offer reporting tools to help the nonprofit review how effective its program is, plus it should provide ACH support for automatic recurring payments.
  • Proper incentives are necessary for keeping donors intact. A nonprofit can offer rewards or benefits to people to donate enough funds or stick with a campaign long enough. The nonprofit can put some of its funds aside for this case, but it shouldn’t spend more on this than necessary.

The best way to run a recurring donation program is to ensure the donors see the difference a nonprofit makes. Donors will be more invested in a program when they see where their money is going and how it benefits society. People will be more passionate when they notice they are making a difference with their donations.

How Will Donors Cancel Their Recurring Donations?

Some donors might need to cancel their recurring donations for various reasons. A donor might not have enough money to give, or the donor might not feel comfortable with offering. A nonprofit can offer the choice to cancel one’s recurring donations. The user can go to one’s profile on a website and then click the proper button on one’s payment method to stop one’s donations.

It will likely be easy for nonprofits to keep their donors through a recurring platform. The recurring system provides a simple design for work that helps a nonprofit collect its regular payments. A nonprofit can predict what it will earn, and donors will feel confident in the process, knowing that their funds are going directly to the organization.

Bank of America to pay $772 Million Penalty

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On Wednesday April 9, 2014 Bank of America settled a lawsuit and agreed to pay $772 million in penalties for deceiving millions of customers into buying costly and unneeded services when they signed up for credit cards.

The Crux of the Case

The Consumer Financial Protection Bureau said that Bank of America illegally deceived 2.9 million customers into buying extra credit card services those customers did not need and that Bank of America charged others for needless credit monitoring between 2000 and 2012.

“Bank of America both deceived consumers and unfairly billed consumers for services not performed,” Richard Cordray, director of CFPPB told the Associated Press. The settlement deal is the largest refund amount ordered to date by the CFPPB, and is the biggest settlement over credit card “add-on” services won by the federal government.

Bank of America will also have to pay an additional $20 million penalty to the Consumer Financial Protection Bureau and $25 million to the Office of the Comptroller of the Currency.

Delving into the details of the settlement, some of the misleading practices included Bank of America telemarketers telling customers that the first 30 days of a service were free when instead the customers were charged. Also, the bank led customers to believe that they were merely agreeing to receive additional information about add-on services, when in fact the bank was enrolling those customers into the services during calls.

Bank of America released a statement saying that the bank had already refunded money to a “majority” of the affected customers.

Bank of America’s Been to the Dance Before

This isn’t the first time Bank of America has been hit hard by its desire to charge customers fees. Back in 2011, when the Durbin Amendment going into effect was all the rage, Bank of America came up with a plan to charge their customers a fee for using their debit cards.

Bank of America stated its reason for this fee was to offset predicted losses the bank would incur because of the Durbin Amendment.

This went over like a lead balloon, and eventually Bank of America backed off this idea. It’s no mere coincidence that this fee and the resultant backlash heralds from the time period covered in the lawsuit. It seems back in those days, Bank of America was just really into adding fees for everything it could think of.

Transparent Pricing and No Fees

Host Merchant Services was hip to the pitfalls of fees right from its inception. HMS delivers personal service and clarity. The company promises no hidden fees. And a transparent pricing plan so that its customers are not saddled with all of these “add-ons” that Bank of America was so gung-ho about in 2011.  HMS  believes that when you get your statement every month, you should understand every item, and it should match what you were promised in the sales process.

Can Durbin Debit Rates Go Even Lower

Can Durbin Debit Rates Go Even Lower? [2025Update]

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A new U.S District Court ruling could lead to major changes in debit card processing fees. Will the Durbin debit rates go lower with this? Let us understand.

On July 31, U.S. District Judge Richard Leon swept aside the Federal Reserve‘s 2011 implementation of the Durbin Amendment. Passed in 2010, this amendment to the Dodd-Frank law was intended to limit the upward trajectory of debit processing rates. According to Leon, the Fed’s 2011 regulations directly counteracted the original intent of the Durbin Amendment. Though the Fed capped the base rate for debit processing fees at 21 cents, they raised debit rates for transactions under $12. Essentially, the Fed lowered the debit price for large transactions while raising them substantially on small transactions.

Can Durbin Debit Rates Go Lower?

Durbin Debit Rates

In general, debit card caps are highly advantageous for retail businesses. However, the current implementation of the Durbin debit amendment creates grave concerns for many retailers. It is sensible to lower debit card interchange fees at a time when many retail companies are struggling with low consumer demand. Months will pass before the nation sees new, concrete debit processing rules. In the meantime, the response to Judge Leon’s ruling starkly illustrates a growing conflict between the retail industry and major banks.

In this struggle to define the costs of merchant services, both sides claim to represent the best interests of the public. However, the banking industry is so politically influential and entrenched that it is hard to see this industry as truly vulnerable or consumer-focused. Retailers are achieving broader public support as they tout their intentions to lower costs for ordinary Americans.

To be fair, it is demonstrably true that banks could lose enormous profits in the wake of Judge Leon’s ruling. Undoubtedly, the banking industry will pass some of these costs on to consumers in the form of higher fees and tighter restrictions. A strong, profitable American banking industry is vital for the United States and the global economy. 

At the same time, history has shown that the banking industry is far less volatile than the retail sector. When banks are in danger of failing, they can often use their political influence to gain unique concessions and loans from the government. In stark contrast, retailers must stand on their own during problematic times. In light of this power imbalance, the public may well benefit from retailer-friendly debit price controls.

The new ruling on Durbin debit rates represents a fascinating turn of events. However, only time will tell if Judge Leon will have the final word in Durbin implementation. The Federal Reserve and large banks have many more tools at their disposal in their quest to control the state of debit processing fees.

What Is the Durbin Amendment

The Durbin Amendment is a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a law enacted in 2010 in the United States. It was named after Senator Richard Durbin, who played a role in its development. This amendment primarily focuses on the fees that merchants pay to banks for processing debit card transactions, known as interchange fees.

What Is the Durbin Amendment

The key features of the Durbin Amendment are as follows

Regulation of Interchange Fees: The Durbin Amendment introduced regulations to limit the interchange fees charged by banks to merchants, for processing debit card transactions. The aim was to make these fees more reasonable and transparent.

Exemption for Smaller Financial Institutions: These regulations specifically apply to institutions that surpass a certain asset threshold. Smaller banks and credit unions generally do not have to follow the restrictions on interchange fees.

Choice of Network Routing for Merchants: Another objective of this amendment is to promote competition among payment card networks. It allows merchants to select which network they prefer for processing debit card transactions. This provision encourages competition. May potentially reduce costs, for merchants.

Prohibition of Exclusive Network Agreements: The Durbin Amendment prohibits card networks from imposing agreements that would restrict merchants from routing their transactions through networks.

Measures to Protect Consumers: The amendment included provisions that aimed to strengthen consumer protection. One of these provisions required issuers to offer consumers a choice, between two payment card networks that were not affiliated with each other for each debit card. This gave consumers options and flexibility.

Challenges in Implementation

The implementation of the Durbin Amendment faced some difficulties, which sparked debates about its effectiveness and potential unintended consequences. While some believed that it successfully achieved its goal of reducing interchange fees others had concerns about effects on smaller banks and financial institutions.

Impact on the Debit Card Industry

The Durbin Amendment had an impact on the debit card industry by changing the dynamics of interchange fees and fostering competition among payment networks. It continues to be a regulation in the United States influencing the relationships, between banks, merchants and consumers when it comes to debit card transactions.