[GUEST POST] Donors Covering Transaction Costs: To Ask or Not to Ask. That is the Question
Does it ever make sense not to ask donors to cover transaction costs?
A new report may finally put to bed one of the most contentious questions in online donation forms that’s plagued the nonprofit community for a long, long time.
Esoteric among those of us in the fundraising business for sure; we obsess about maintaining the sanctity of our donors. Do we have the audacity to ask them to cover transaction costs? Have we the chutzpah to ask our donors to give even more?
A new Fundraise Up report has the answer and then some. Data was collected between September 1, 2020 through May 10, 2021. Just shy of 540,000 user sessions were analyzed, comprising some 483,000 individual donors.
Here’s what we asked:
- How does covering the transaction costs on a first donation affect the coverage of costs on subsequent donations?
- How does the coverage of transaction costs affect the donation amount of subsequent donations?
- Does covering transaction costs affect whether a donor will cover costs on their next donation?
Question 1: How does the coverage of transaction costs affect the donation amount of subsequent donations?
What the data said: Fundraise Up found that the first donation positively impacts the amount of the next donation. However, covering transaction costs does not impact the amount of subsequent donations.
That is to say, asking a donor to cover the administration costs of a donation the first time has no effect on the amount that they give on future donations. This is significant because so many in our industry are certain it’s the opposite- that asking a donor to cover costs causes them to donate less or not at all on subsequent donations.
Question 2: Does covering transaction costs affect whether a donor will cover costs on their next donation?
What the data said: For the majority of donors, there’s no statistically observable evidence that the option to cover transaction costs prevents subsequent donations. And among the largest nonprofits, covering transaction costs increases the likelihood of subsequent donations. For the majority of nonprofits, there is not a statistically significant difference between donors who cover costs and those who don’t when the donation size is $100 or more. However, donors who donate $80 or less and cover transaction costs on their first donation are 14% less likely to donate again when compared to similar donors who don’t cover the transaction costs.
This means that out of 100 donations of $80 or less where the gift giver chose to cover transaction costs, only 14 of them did not come back to give again.
Question 3: How does covering the transaction costs on a first donation affect the coverage of costs on subsequent donations?
What the data said: Covering the transaction costs on the first donation increases the likelihood of covering the costs on subsequent donations by 26%.
Defaulting the cover costs option to “yes” increases the likelihood of covering transaction costs on subsequent donations by 12%.
To sum up, it seems the massive disagreement among the pundits is probably not deserving of all the attention this subject gets.
The data demonstrates that there is no evidence that the option to cover transaction costs dissuades future donations.
Significant? You bet it is. The argument about asking to cover costs has been hotly contested since the beginning of the charity-as-a-business model has existed. Hopefully, these findings will convince the good people behind fundraising that it’s okay, indeed a smart business practice, to ask for coverage of costs.
The fact is that people who donate to charities, by and large, understand that there are costs involved. And they’re often more than willing to cover them.
Larry Cardarelli is Director of Agency Partnerships at Fundraise Up.