Processing online donations costs your organization money. These fees go to pay either the credit card company, payment processor, or giving software. In our last blog in this series, we went over flat-rate pricing and how its simplicity is actually harmful to the Church. In reaction to the expensive flat-rate pricing, the second model in our series, tiered pricing, was introduced. This is a more efficient model than flat-rate pricing, but it is still ultimately harmful.
What Is Tiered Pricing
Rather than a single flat rate, companies like Tithely and Pushpay will offer different rates based on either the payment method or vendor services. For instance, a company may promote three different tiers—credit cards at 3%, debit cards at 2%, and ACH at 1%. Tiered pricing is an attempt at condensing a complicated matter into easily defined areas.
Pros of Tiered Pricing
This pricing model is pretty easy to anticipate processing costs for the month. If you know the type of payment method used by your givers, then you have a good idea of what you’ll owe. The other advantage of tiered pricing is in its customizability. You can choose to pay for a specific tier of services or only accept certain payment methods.
Cons of Tiered Pricing
However, these rates are still higher than what they should be, especially for ACH gifts. Gifts made with a bank account don't have interchange rates, so even if you’re being charged 1%, that’s still too high. Actually any percentage that is not 0% is too high.
We’ve also found a similar lack of transparency and hidden fees that can be found with flat-rate pricing models. Instead of charging for add-ons, they will offer different versions of their plans. As the plan’s features increase, so does the price.
What Is Interchange
Interchange is the percentage that card companies charge vendors to accept card payments. If you've ever wondered how card companies like Visa, Discover, and Mastercard can afford their promotions and cashback offers, the answer is interchange.
Each card company has a different interchange rate for each of its card types. A few of these companies have typically higher rates than others, and these rates can change every year.
Bringing It All Together
In the end, tiered pricing is a better alternative than flat-rate thanks to its simplicity and potentially cheaper rates. But if you look closely, you can find the same underhanded business practices found in companies with flat-rate pricing models. It feels like the same broken car, just with a new paint job.
At My Well Ministry we want our readers to be as informed as possible. To continue learning about payment processing, be sure to subscribe to our mailing list to be notified when our next blog in this series comes out.