The Illusion of Free Fundraising Services

Welcome to this edition of Beat Behind Each and Every Product covering the latest products and features in our platform at Click and Pledge. We are the team here at Click and Pledge and today we're going to get into something really important for any effective fundraiser out there.

Yeah, we're doing a deep dive into this myth that just won't go away.

The free service myth. It's so persistent and honestly it's pretty misleading.

It really is. So we're going to guide you through what's actually happening with transaction costs and vendor transparency.

And we think this is a necessary conversation to have.

Oh, absolutely. Because what we've seen is that when non profits go chasing after these services advertised as free, they, well, they often end up as victims of some very clever sales and marketing deception.

So what's the one thing you should take away from this?

We recommend you really truly understand the mechanisms behind these seemingly zero cost services. That's the key.

Okay. So let's start with I think the most basic question. The one that sort of exposes the whole thing. Any company providing a service, I mean they have payroll, they have rent, they have massive website hosting costs, how can any of that possibly be free?

It can't. That's the short answer. It just can't. Nothing in the business world is actually free.

The economics don't work.

Exactly. The expenses have to be covered somewhere. The real danger here is that some clever marketing can make a non profit leader feel like they've found the one exception to this rule.

And it's just not a sustainable idea. So if it's not free, where's the money coming from? What's the trick they're using?

The deception is, I mean, it's pretty straightforward when you break it down. The vendor just advertises their service as free to the nonprofit.

To the nonprofit,

right. Because they simply shift the entire financial burden onto the donor. So, you know, the nonprofit doesn't write a check, but their donor is now funding the vendor.

That's already not great, but this is where the story can get, really alarming. We should talk about that documented case we saw.

Yes. The one with the, what we'd call fake donation forms.

Tell us about that.

Okay. So we observed a company that was just generating donation pages for some pretty big nonprofits, but they were doing it completely without the nonprofit's knowledge.

No permission at all. These weren't just random pages floating around were there?

No, not at all. They were actually engineered so that when a donor searches for that organization to donate, these forms would show up first.

Right at the top of the search result?

Exactly. Yeah. So the donor thinks, oh this is great, this is easy and they use the form thinking they're giving directly to the charity they love.

But they're not!

They are not. The vendor company gets the money first then they deduct a massive fee sometimes 20% or even more and then they send the rest to the nonprofit.

They frame it like they're doing them a favor.

Here's a donation we found for you.

Meanwhile, they've just hijacked the contribution and put a 20% tax on it. Money that was meant for the mission is just gone.

It's a perfect example of how chasing free can mean you lose total control over your donor relationships.

Right. And that's an extreme case, but let's talk about the more common model. The one that's affecting, you know, tons of non profits right now.

The donor tax. Yeah. Or mandatory tipping.

How does that actually work? What does a donor see on the screen?

Well, the donor is asked and sometimes pretty aggressively pushed to pay a large tip.

And this isn't a tip for the non profit?

Not at all. It's a tip usually between 1520% of their donation that goes directly to the fundraising company.

Just for providing the form?

Just for providing the form. And they'll use language like help us keep this service free for the nonprofit.

Yeah.

You know, playing on the donor's goodwill.

And here's the really manipulative part. Right? The option to not pay that tip.

Oh, it's almost always hidden. It'll be like a tiny little checkbox or buried in a drop down menu that's already set to the highest tip amount. They're using design patterns to make it hard to opt out.

So let's quantify this. Let's put some numbers on it. A donor wants to give you a $100.

Right. A $100 for your mission. But their giving potential is immediately cut by 15 or $20. That money is just gone, diverted to the vendor's profit margin.

Which raises the big question we think everyone should be asking.

How does reducing your donor's ability to give by 20% actually help your nonprofit?

It doesn't. It just it can't. When that much money is taken out of a donation for, you know, a food bank or an animal shelter, we suggest that's just a huge drain on philanthropy. It's like highway robbery.

It is. And this brings up a bigger point. We need to shift the conversation away from these vendor fees.

And talk about what a nonprofit truly needs covered. Their actual legitimate overhead.

That's the pivot. Yes. If you look at the big picture, a nonprofit's cost of doing business. So rent, electricity, salaries, website hosting, and yes, credit card fees. All of that is necessary overhead.

It's what you need to survive and operate.

Exactly. So if you're going to ask the donor to help cover costs, we recommend making a much better, more transparent ask.

Don't ask them to fund a vendor's free service.

No. Ask them to help cover your organization's total overhead. Our data suggests for most non profits, that's around 10%. So you could ask for a transparent 10% on top of their donation.

And that way the donor knows their full $100 is going to the mission.

And the extra 10% is going directly to keeping the lights on at the organization they believe in.

Okay, so let's get really clear on the numbers. Let's contrast those, you know, deceptive fifteen-twenty percent fees with the actual real cost.

Yes. This is where it gets confusing for people but it's simple. There are two costs. First, the unavoidable one. Processing the credit card itself.

The interchange fees.

Right. And across the whole industry, that cost is basically the same for everyone. It's about 3%. To be precise, it's usually 2.95% plus 15¢.

And every single payment processor pays that. It's just the cost of moving money.

Correct. The second cost is the platform fee. That's for the technology, the reports, the security.

Which for the free companies is that hidden 15 to 20% tip.

Exactly. But with a transparent platform like ours, that fee is stated clearly. Our platform charge is 2.75 percent and 20¢ per transaction.

So you know exactly what you're paying for the technology.

Right. Your total cost is predictable. It's the unavoidable 3% ish processing fee plus our platform fee. It's a reasonable charge for all the tech you get.

So now let's go back to the free model. Knowing these numbers, it just seems absurd, doesn't it?

It really does. Why would you let your donors pay 15 or 20% to some other company when the actual unavoidable cost is only about 3%?

That difference, that huge gap of 12 to 17. Percent.

That is pure vendor profit. It's being siphoned right off the top of your donors generosity all under this banner of a free service.

It's hard to justify. You're basically trading a small, predictable technology expense for a massive hidden fee that hurts your donors and your revenue. Makes no sense.

No. And maximizing donor giving is all about transparency and being smart. The most effective leaders are the ones who reject that free sales pitch and look for clear, predictable costs.

So we really hope this deep dive gives you the tools you need to ask some tough questions about where the money is actually going.

And we want to leave you with one final thought to consider.

Go ahead.

How can a nonprofit ethically justify putting its donors through a process where 15 to 20% of their gift is taken by a vendor when that money could have and should have gone directly to supporting the mission?

A very important question. For more information about this and all Click and Pledge products, make sure to visit clickandpledge.com and request for a one on one training or demo.

Whether you are a client or just curious about our platform, just ask us and we will gladly get together with you to chat.

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