Some Credit Card Processors Profiting From Haiti Relief Donations
When making an online donation to a favorite charity, you may be unintentionally lining the pockets of a financial institution. Some of these enterprises may be hiding behind the anonymity of the e-commerce supply chain. The 2% to 7% processing fees may be small and shouldn't deter online contributions, but are banks and processors taking a cut of badly needed donor funds before help gets to boots on the ground in Haiti?
When a nonprofit or other agency requests an online donation through a link on a Web page, a complex sequence of events begins. It starts at the Web page, then works through one or more intermediaries before it reaches the intended beneficiary.
Paypal sellers already know this; they must pay "merchant fees." Paypal charges sellers a per-transaction fee that accounts for the reason that co-founder Elon Musk (estimated net worth $328M) became a multi-millionaire. Are these intermediaries collecting their standard fees when processing online donations?
Consider the size of the major card processors and issuers. Credit card usage may be declining somewhat due to the recession, but it's big business. Visa alone, the largest issuer, has 309 million credit cards in circulation, and ordinarily charges a fee for every transaction. The credit card business is profitable. In 2008, JP Morgan Chase earned $780 million from its credit card operations (though not only from processing fees).
In light of the needs of Haiti-based charitatble non-government organizations (NGO's), Technorati sought to find out about fees being charged by contacting several banks and processing organizations. The responses received were mixed, and surprising.
Some institutions understood the issue immediately, and had already taken steps to address the concerns. Some had existing policies in place to address donation fees. Others were silent on the issue.
Among those contacted, we heard back from industry leader Visa. Visa is donating back its fee revenues through the end of February 2010 and, for eleven select charities, is also waiving the interchange fee. It's unclear how these eleven major charities (see below) were selected, but the list doesn't include Doctors without Borders, for instance.Continued on the next page