UK charities can accept payments and donations in many different ways, including online card payments, contactless donations, card machines, recurring payments, Direct Debit, payment links and telephone payments.
The right payment setup depends on much more than transaction price. A charity may need to consider donations versus trading income, Gift Aid capture, fundraising platforms, recurring donors, charity shops, events, card-machine requirements, donor-management integrations, settlement and reconciliation.
Some qualifying charity card transactions may also benefit from preferential interchange arrangements, depending on the card scheme, merchant classification and acquiring setup. This does not mean that card processing is automatically free.
Merchant Advice Service helps charities understand their payment requirements before introducing them to payment providers that may be suitable.
What payment services do charities need?
There is no single charity payment setup.
A small local charity taking occasional donations may need something completely different from a national organisation collecting thousands of recurring donations and operating multiple charity shops.
Payment requirements can include:
- online donations;
- one-off card donations;
- recurring donations;
- Direct Debit;
- contactless donation devices;
- card machines;
- charity shop payments;
- event and fundraising payments;
- payment links;
- telephone donations;
- international donations;
- membership or subscription payments;
- ticket or merchandise sales;
- Gift Aid data capture; and
- integration with CRM, fundraising or donor-management software.
The first step is therefore to separate the different ways money enters the charity.
Charity donations and trading income are not the same thing
This distinction is particularly important.
A supporter donating £50 to a charity is not necessarily making the same type of payment as somebody spending £50 in the charity's shop.
A charity might receive money from:
- voluntary donations;
- regular supporters;
- charity-shop sales;
- event tickets;
- fundraising merchandise;
- memberships;
- sponsorship;
- services;
- corporate supporters; and
- other trading activities.
This can matter for both payment processing and Gift Aid.
HMRC states that Gift Aid generally applies to qualifying donations from individuals where the required declaration has been made. A payment for goods or services is not automatically a Gift Aid donation.
Charities with significant donation and retail activity may therefore want their payment provider to distinguish between different payment channels or activities for reporting and reconciliation purposes.
What is a charity merchant account?
A merchant account forms part of the card-payment infrastructure that allows an organisation to accept eligible debit and credit card transactions and receive settled funds.
For a charity, the acquiring setup might support:
- website donations;
- recurring card donations;
- physical card terminals;
- contactless donation devices;
- payment links;
- virtual terminals;
- telephone payments; and
- charity-shop sales.
The merchant account needs to work with the payment gateway, terminal, fundraising platform or software being used.
Read our Merchant Accounts guide for a broader explanation of acquiring and settlement.
Charity MCC 8398 and merchant classification
Card schemes use Merchant Category Codes (MCCs) to describe the type of activity being processed.
MCC 8398 is used for qualifying charitable and social-service organisations.
However, a charity can conduct more than one type of activity.
For example, the payment profile for charitable donations may differ from payments made in a retail shop operated by the charity.
The acquiring provider should therefore understand:
- what proportion of transactions are donations;
- whether the charity also sells goods or services;
- whether charity shops are involved;
- how online fundraising operates;
- which legal entity receives the funds; and
- whether different merchant IDs or reporting structures are appropriate.
Correct merchant classification can also be important when assessing whether particular card-scheme charity arrangements apply.
Can charities pay lower interchange fees?
Potentially, for qualifying transactions and acquiring setups.
Interchange is one component of the total cost of card processing.
Card schemes can have specific programmes or rates for qualifying charity transactions. For example, Mastercard publishes an Approved Charity Waiver within its UK interchange schedule.
However, charities should not assume that:
- every card transaction qualifies;
- every card scheme applies the same rules;
- the charity's provider has configured the account correctly;
- charity-shop purchases are treated in the same way as donations; or
- reduced interchange means there are no other processing costs.
The charity should ask its payment provider:
- which merchant category code is being used;
- which transactions qualify for charity interchange arrangements;
- which card schemes participate;
- what interchange is actually being charged;
- whether the reduction is passed through under the pricing model; and
- which other fees still apply.
Could your charity be paying unnecessary card fees?
Some qualifying charity transactions may benefit from preferential card-scheme interchange arrangements. Eligibility depends on the transaction, merchant classification, scheme and acquiring setup.
Read our guide to interchange fees for charities →
Does reduced interchange mean free card processing?
No.
Interchange is only one part of the overall cost of accepting cards.
Depending on the provider and payment setup, costs can also include:
- acquirer or processor margin;
- card-scheme fees;
- gateway charges;
- authorisation fees;
- terminal rental;
- contactless donation-device costs;
- platform charges;
- PCI-related fees;
- refund charges;
- chargeback fees;
- international-card charges; and
- other monthly or transaction charges.
This is why charities should compare the complete cost of payment acceptance rather than assuming that a charity interchange arrangement makes all card payments free.
Online donations
A charity accepting donations through its own website may use a payment gateway connected to its merchant account.
A typical journey might look like:
supporter chooses amount → enters donor details → selects Gift Aid where appropriate → completes payment → donation is recorded → donor receives confirmation → payment is reconciled
The payment process should be easy for donors, but the charity should also consider what happens behind the checkout.
Questions include:
- which payment methods are supported;
- whether one-off and recurring donations are available;
- how Gift Aid declarations are recorded;
- whether donor data enters the CRM automatically;
- how payments are reconciled;
- how failed recurring payments are handled;
- what the donor sees on their bank statement;
- how refunds are processed; and
- what fees apply.
Visit our Payment Gateways guide for more information about online payment infrastructure.
Should a charity use a fundraising platform or its own payment provider?
Both models can work.
A fundraising platform can provide an established donor journey and may include features such as campaign pages, fundraising tools and Gift Aid administration.
Using the charity's own payment gateway and merchant account can potentially provide greater control over:
- the supporter journey;
- branding;
- payment data;
- CRM integration;
- recurring billing;
- reporting;
- settlement;
- provider selection; and
- payment costs.
It does not have to be an either-or decision.
A charity might use external fundraising platforms for supporter-led campaigns while operating its own payment infrastructure for donations made directly through its website.
The important question is where the charity wants control of the payment and donor relationship.
Find Suitable Payment Providers for Your Charity
Recurring donations
Regular giving can create a different payment requirement from one-off donations.
A supporter may donate:
- weekly;
- monthly;
- quarterly;
- annually; or
- on another agreed schedule.
Recurring card payments require the appropriate recurring-payment infrastructure rather than asking the donor to re-enter their card details every month.
The charity should consider:
- secure tokenisation;
- failed-payment handling;
- expired or replaced cards;
- donation amount changes;
- cancellations;
- donor communications;
- CRM integration; and
- reconciliation.
Read our Recurring Payment Processing guide for more information.
Direct Debit for regular charity donations
Direct Debit is another option for charities collecting regular donations from UK supporters.
It may be particularly suitable where:
- the donor relationship is ongoing;
- payments are predictable;
- the charity expects donations to continue for a longer period; or
- the charity already has Direct Debit integrated into its fundraising systems.
Cards and Direct Debit do not have to compete with one another.
A charity can offer several methods and allow supporters to choose the one that suits them.
The charity should compare collection costs, failed-payment handling, integration, donor experience and administration rather than selecting a method solely because its headline transaction cost appears lower.
Contactless donations
Contactless donation devices allow supporters to make card or mobile-wallet donations without cash.
These can be useful in:
- museums;
- places of worship;
- visitor attractions;
- charity events;
- fundraising stands;
- reception areas;
- public venues; and
- temporary fundraising locations.
Some devices allow the charity to present fixed donation values, while others offer a more conventional payment-terminal journey.
Before choosing a contactless donation solution, consider:
- device cost;
- transaction charges;
- connectivity;
- battery or power requirements;
- settlement;
- reporting;
- Gift Aid data capture where required;
- whether donations can be allocated to different campaigns; and
- how the data reaches the charity's fundraising system.
Card machines for charity shops
Charity shops have many of the same face-to-face payment requirements as other retailers.
They may require:
- countertop terminals;
- portable terminals;
- EPOS integration;
- refund functionality;
- multiple tills;
- multi-site reporting;
- centralised settlement reporting; and
- reliable technical support.
For charities with a substantial retail estate, the payment requirement can therefore become a multi-location acquiring and EPOS project rather than simply choosing an individual card reader.
Visit our Card Machines guide for more information.
Charity events and fundraising
Charities may need additional payment capability for:
- fundraising dinners;
- auctions;
- sponsored events;
- community fundraising;
- festivals;
- temporary stalls;
- runs and sporting events;
- raffles where legally permitted; and
- other fundraising activity.
The existing merchant account may be able to support additional or temporary terminals, payment links or other payment channels.
The charity should establish this with its provider rather than assuming it needs an entirely separate payment account for every event.
Connectivity should also be planned in advance where the event takes place outdoors or at a temporary location.
Payment links for charities
Payment links can provide a simple way of requesting a card payment without building a full checkout.
A charity might use them for:
- event payments;
- corporate fundraising;
- specific appeals;
- membership payments;
- outstanding invoices;
- supporter payments; or
- another agreed card transaction.
The charity sends a secure link and the payer completes the transaction through the provider's hosted payment page.
Read our Pay by Link guide for more information.
Telephone donations and payments
Some charities continue to receive donations and other payments by telephone.
Depending on the requirement, this can be handled using:
- a virtual terminal;
- a MOTO payment facility;
- secure telephone payment technology; or
- an IVR payment system.
Where possible, charities should avoid unnecessary handling of card details by staff.
A secure telephone payment solution can allow payment details to be entered or processed without storing card information in general office systems.
Gift Aid should be treated as a separate donor declaration process. HMRC allows Gift Aid declarations to be made in writing, online and, subject to its requirements, verbally.
Gift Aid and card payments
Gift Aid is not a card-processing discount.
It is a UK tax-relief scheme that allows eligible charities and Community Amateur Sports Clubs to claim additional value on qualifying donations from eligible taxpayers.
HMRC currently states that a charity can claim an additional 25p for each £1 donated where the requirements are met.
For a charity to claim Gift Aid, the necessary donor declaration must be obtained and retained.
The payment system can help capture the information, but the payment processor itself does not determine whether a donation qualifies.
This distinction is important because not every payment made to a charity is eligible.
For example, HMRC states that Gift Aid cannot normally be claimed on a payment that is simply for goods or services.
Can Gift Aid be captured during an online donation?
Yes, provided the charity's process captures the information HMRC requires and the underlying donation is eligible.
An online donation journey might therefore collect:
- donor name;
- address information required for the declaration;
- donation amount;
- Gift Aid declaration;
- campaign information; and
- payment confirmation.
The charity should make sure this information reaches the appropriate fundraising or CRM system and is retained in accordance with its Gift Aid processes.
Integrating payments with a charity CRM
Larger charities may want payments to connect with their donor-management or CRM platform.
A useful integration can connect:
supporter → campaign → donation → Gift Aid declaration → payment → settlement → CRM → finance reconciliation
The exact architecture depends on the software being used.
Potential integration requirements include:
- donor records;
- campaign codes;
- one-off donations;
- recurring donations;
- Gift Aid status;
- failed payments;
- refunds;
- settlement;
- finance reporting; and
- supporter communications.
Our Integrated Payments guide explains the wider integration considerations.
Why reconciliation matters for charities
Collecting a donation is only one part of the process.
The charity also needs to understand:
- who donated;
- which campaign generated the donation;
- which payment method was used;
- whether Gift Aid applies;
- which fees were deducted;
- when the funds settled;
- whether the donation was refunded;
- whether a payment subsequently failed or was disputed; and
- how the transaction appears in the accounts.
This becomes increasingly important where several payment providers, fundraising platforms and donation channels are being used simultaneously.
A lower transaction rate can quickly lose its value if the finance team has to spend substantial time manually matching payment settlements to donor records.
International donations
UK charities with international supporter bases may receive cards issued outside the UK.
The charity should establish:
- which countries can be accepted;
- which cards are supported;
- whether donors can pay in multiple currencies;
- international-card pricing;
- foreign-exchange costs;
- fraud controls;
- settlement currency; and
- how international donor details are recorded.
International card transactions may have a different cost profile from domestic UK consumer cards, so charities with substantial overseas giving should include this in any provider comparison.
Payment security and PCI DSS
Charities accepting card payments need to understand their PCI DSS responsibilities.
The precise requirements depend on the payment channels and technology being used.
Using hosted payment pages, appropriate terminals and outsourced payment technology can reduce the amount of card data handled directly by the charity.
However, outsourcing card processing does not automatically remove every PCI DSS responsibility.
Charities should avoid recording card details in inappropriate systems such as:
- spreadsheets;
- CRM notes;
- email;
- paper files;
- general telephone notes; or
- other systems not designed for cardholder data.
What does charity payment processing cost?
Costs depend on the payment channels, card mix, transaction volumes and commercial arrangement.
They can include:
- interchange;
- scheme fees;
- acquirer margin;
- gateway charges;
- terminal rental;
- contactless donation-device costs;
- monthly fees;
- authorisation fees;
- international-card charges;
- refund fees;
- chargeback charges;
- platform fees; and
- integration costs.
Charities should therefore compare the effective total cost rather than relying on a single advertised transaction percentage.
What should a charity ask its existing payment provider?
Before switching, it can be useful to establish exactly how the current account is configured.
Ask:
- Which MCC is being used?
- Are donations and retail transactions separated?
- Does any charity interchange arrangement apply?
- How much interchange are we currently paying?
- What scheme fees are being charged?
- What is the provider margin?
- What are we paying for the gateway?
- What are our terminal costs?
- How are international cards priced?
- What is our settlement period?
- How are recurring donations handled?
- Can payment data integrate with our CRM?
- What happens to recurring payments if we switch provider?
For larger charities, recent processing statements can provide much of the data needed to make a meaningful provider comparison.
What should charities compare between payment providers?
Price matters, but the cheapest-looking provider is not necessarily the lowest-cost or most practical option.
Compare:
- charity-sector experience;
- merchant classification;
- interchange treatment;
- online donation capability;
- recurring card payments;
- Direct Debit requirements;
- payment links;
- telephone payments;
- contactless donation devices;
- charity-shop card machines;
- multi-site support;
- CRM and fundraising integrations;
- Gift Aid data requirements;
- international donations;
- settlement;
- reporting;
- reconciliation;
- PCI responsibilities;
- support;
- contract terms; and
- the total cost of processing.
Find Suitable Payment Providers for Your Charity
Preparing to compare charity payment providers
Before approaching providers, map the charity's current payment environment.
Useful information includes:
- charity registration details;
- annual card-payment volume;
- annual donation volume;
- average transaction value;
- one-off versus recurring donations;
- online versus face-to-face transactions;
- number of charity-shop locations;
- number of card terminals;
- international-card volume;
- current provider;
- existing processing statements;
- payment gateway;
- fundraising platforms;
- CRM or donor-management software;
- Direct Debit setup;
- settlement requirements; and
- any payment or reporting problems the charity is trying to solve.
This gives potential providers a much clearer specification and makes it easier to compare solutions on a like-for-like basis.
Merchant Advice Service helps charities understand their payment requirements before introducing them to providers that may be suitable.
Sources & References
About Merchant Advice Service
Merchant Advice Service (MAS) provides independent information, comparison and provider-matching support for UK businesses and organisations looking for payment services.
We help organisations understand their payment requirements before introducing them to providers that may be suitable. MAS does not provide payment processing services directly.
Disclosure: Merchant Advice Service may receive commission from payment providers following a successful introduction. This does not increase the price paid by the organisation and does not determine which providers are included in our editorial guidance.
