What does free get you?
The allure of “free” offerings can captivate, especially when platforms promise to boost your fundraising efforts without any upfront costs. However, peeling back the layers and understanding the hidden expenses that come with these seemingly generous propositions is crucial. Let’s dive deeper into the nuances and uncover the underlying costs of “free.”
Who pays
First and foremost, it’s essential to recognize that for-profit companies aim to generate revenue. They are not charities, which raises the crucial question: Who pays for these free services? These platforms make your donors their customers. They do this by soliciting “tips” or “voluntary donations” from your donors during payment. Such practices shift the financial burden from your organization to your supporters, making them the primary revenue source for the platform.
Moreover, the privacy of donor information becomes another concern. Some platforms may sell donor information to third-party entities in their quest for profitability. This action breaches the trust between your organization and its supporters and exposes donors to unsolicited communications, potentially eroding their willingness to contribute.
Guilt By Association
Some platforms’ tactics for encouraging donor generosity can sometimes cross the line into manipulation. They often subject donors who choose not to leave a tip to guilt-inducing messages, attempting to sway their decision by playing on their emotions. This approach affects the donor’s experience and can tarnish your organization’s reputation by association.
Mistakes in the donation process, such as hastily agreeing to a tip percentage, can lead to donor dissatisfaction and frustration. These incidents, though seemingly minor, can have lasting effects on donor relationships. An accumulation of negative experiences can make individuals less likely to support your cause in the future.
There is also a need for insight into how much your donors gave. These platforms do not share how much money they raise from your donors. This can be problematic over time, as they hold out their hats each time they go to donate money to you. The amount they make off your donor is essentially unbounded.
Taxes
A vital tax implication exists when utilizing “free” platforms. If you run a fundraising campaign on such a platform and a supporter donates $100 but agrees to a tip amounting to $121, what is the charitable donation amount for tax purposes? The extra money goes to the platform; the donor can only claim the $100 donation on their taxes. This is counterintuitive and adds confusion for the donor.
Contrast this with an organization running its merchant organization and asking for the same tip to cover its expenses. See the subtle difference? A free platform asking for a tip versus a charitable organization asking for help to cover its overhead. Since the charity asks for the money and goes to the charitable organization responsible for paying fees, the donor can claim a total of $121 as their charitable donation.
Shenanigans
The “free” platforms have very particular use cases. While the proposition of free services may seem attractive at first glance, it’s vital to consider the broader implications for your organization and its supporters.
- Donor information possibly shared with third-party entities
- Donors being subject to guilt-inducing messages for not leaving a tip
- Donors being asked to pay for your free platform
- Tax implications for donations by donors
- Potential for donor dissatisfaction
Know the shenanigans so you can make an informed decision that aligns with the best interests of your organization and its mission.