Say I choose to donate $0.01, a single penny, to a charity. How much does it cost them in administrative overhead, record keeping, data entry, automatic mailings and such to receive and process that $0.01 donation?
Probably nothing at all. They would just toss the check or put the penny in the change drawer. So if you were thinking about messing with Komen, you’ll need another plan.
I think most charities have minimum amounts for donation. I just donated to Planned Parenthood and their web site clearly said “$5 minimum”.
Although I suspect if you donate the minimum one time and then never again, they’ll eventually spend more money sending you solicitations than they got from you in the first place.
Usually there’s a “Membership” level of around $25-$50 where they’ll do follow up. They’re not stupid or wasteful. They manage their budgets like all the rest of us.
Thanks for the answers! Some good food for thought.
Well, you can certainly donate 1¢ to the Salvation Army, but it just gets aggregated with all the other donations, so it’s still a win for them.
It depends on the size of the organization and the level of connection they have with donors (further mailings, etc.). Also depends on the efficiency and level of automation they have for donation processing. Most important, as alluded above is how you make the donation. I can figure out a breakdown for the org I work for - midsize with partial automation but actual human beings process each gift and we have a very personal relationship with donors so lots of future contact.
$.01 cash is easy to deal with, just dropped in the pot, no loss there.
$.01 online - wouldn’t go through, we have a $5 minimum.
.01 credit card - I'd hope we would just refuse it. If it was mailed in it would get shredded as a crank, over the phone I think most people would be ashamed to have to say such a thing out loud. We'd definitely lose money on the transaction itself, I think .20-$30 depending on the card type. Beyond that see below.
.01 as a check in the mail, probably would get shredded and blamed on the post office but assuming a diligent and ethical fundraising staff it would cost at least .50 and probably more like $1.00 or 2.00 to deposit the check between bank fees and staff time for opening the mail, writing up deposit, performing electronic deposit and entering the donor and gift information. I'm basing this on average times, I think about 5 or 10 minutes of staff time, up to 20 minutes if it's a first time gift and we need to enter the giver name and address from scratch. Anonymous gifts are quicker, but checks are rarely anonymous. A gift takes the same amount of time to enter if it's .01 or $100,000.
Beyond entry, the costs are for acknowledgement and further engagement. At our org we don’t send receipts for such small gifts except by special request, so no cost right there. We’d add the donor to the mailing list for event calendars and such which is a cost, but part of our mandate is outreach so whether the mailing costs for such things are actually “losses” is debatable. For a $.01 donor in a heavy-mailing geographical area let’s say $8/year.
So, at the worst, that $.01 donation costs us $10. Not great, and if we had a deluge of them we’d be in trouble. But, if we had a deluge we’d figure out a solution - get the board to authorize disregarding sub $1.00 gifts, enter them but exclude them from all mailing or something else. In fact, we generally do exclude obvious spite donors from future mailings so that takes care of that right there. Part of the upside of lack of automation is that we can make that kind of judgement call on a case by case basis. Humorously enough, I can think of 2 different regular donors we have who give $10-$20 a pop 2-3 times per year and always enclose religious literature bashing the faith that our org is culturally linked to and encouraging us all to convert. They keep donating though, so we keep them on the mailing list and their tracts dutifully stapled to the donation records.
All in all, for my org I think we end up barely breaking even on gifts up to $30 or so when you take into account the services we provide, but as I mentioned above simply having a large donor/constituent base is part of our mandate and the major donors make up for the small ones. I have kind of a special feeling for tiny donations as a lot of my donor contact is with little old ladies who diligently send us $2 checks whenever they can and write super-sweet notes about how sad they are they can’t give more. Whenever I have extra time I write back to them to let them know that just having them out there caring and spreading the word about us is amazing. We lose $$ on those tiny checks but how can it actually be a loss when there’s so much love there? Kind of the opposite of what this thread’s about but it’s all part of the same question I think.
For my org, you’d probably end up costing us the same amount with less effort on your part by simply signing up for our mailing list. In both cases you’d be helping us too though by inflating our donor/constituent rolls which is a key metric for a lot of grants and major donors. To more effectively act against an organization you dislike, I’d suggest making a substantive contribution to an opposing group, organizing negative publicity or at an extreme taking political action against the org.
We actually process all gifts, even down to $0.01, because some numbers wonk found that people who gave at the 1-cent level were more likely to give than people who had never given at all. And by “numbers wonk”, I mean myself. Now our phonathon vendor doesn’t like to take gifts of under $5, but if someone sends in a penny in an envelope by goodness we’ll process it. I’ve often seen our gift processor make a scan of coins and/or cash with an envelope for our tax records.
How much does it cost to actually process a $0.01 gift? Probably not a whole lot. Our standard thank-you letter costs about 19 cents to mail at the nonprofit rate, our “cheap” envelopes cost about a penny each at the bulk rate, and our cheap paper about the same. It takes our student gift processor about a minute to scan the coin (both of our offices are right next to the copier, so I see her do it all the time) and another minute to type the gift into the system and print the automated thank you letter (she’s real fast). So that’s two minutes of her time. Just to make it easier let’s say we pay her $10/hr–that’s 12 cents in labor costs. If you think I’m going to factor in electricity costs you’re nuts. It doesn’t cost anything extra to take the penny to the bank because our internal mail picks up all the coins, cash, and checks which show up every day anyway. So all told it costs us 33 cents to process that gift.
So you’re probably thinking, “Geez, what a waste of 32 cents.” But what I found in running the numbers is that even small gifts, if properly stewarded, can lead to bigger gifts in the future. The example I love to give is the donor who gave us a $3 check 40 years ago. Now for his lifetime giving you can add six zeroes to the end of that, and more on top of that. If we’d given up on him 40 years ago, would we have gotten those millions? Hey, there’s always somebody else to donate to who would love to get those millions.
There’s a concept in fundraising called “Donor Lifetime Value” which looks at the likelihood that people will give at a certain level over their lifetime. The number #1 factor in DLV is whether someone gave anything…even one dollar or one penny. There’s a better concept I teach my students: Never give up on a donor, even if all they had was a penny. At least they know who you are and believe in you just a little…which is about 90% of the battle IME.
We certainly do too - I was conjecturing about credit cards since I’ve never see a sub-5 credit card donation. We're prospecting right now and I've personally processed several .25-$1.00 gifts, given the same treatment as bigger ones. With just the bare donation to go on, it’s not possible to tell who’s giving out of spite and who’s genuinely giving what they have. And having them on the donor rolls means a chance to change the minds of even the spiteful ones!
Never forget planned giving either - some of those $2 check little old ladies end up leaving us portions of their estates later on.
Geez I wish we were closer to this. We send all our acknowledgements first class mail, and apparently currently we’re getting hosed on letterhead prices due to a 4-year-long logo revision process - the office supplies manager is afraid to just order the 100,000 pages we need at a time cause he’s afraid to get stuck with it when we finally change over, so it’s getting ordered a case at a time which costs something insane like .50/sheet and .75/envelope. Crazy. Overall I’m proud of our efficiency but our mailing costs are out of control. Not my bailiwick so I try to stay calm and let the decision makers deal with it. Beyond that, sure with a fast well trained data entry person and an existing constituent data entry takes a fraction of the time I posted, but I’m imagining a brand new constituent to be set up and an average-level staffer.
Just goes to show it’s hard to answer this question across the board since all orgs are different.
Yep. Still I have to question what the smallest credit card transaction you’ve actually seen processed is. Accepting .01 cash or check is one thing, but accepting it on a card just seems beyond the pale to me. I’d be inclined to just enter it as a gift and send the receipt without even running it through the card machine!! Everyone knows about credit card processing fees, even those who don’t automatically realize about standard processing costs, so I can’t imagine a sincere donor giving a penny on a credit card. Well, perhaps someone with Alzheimers? In that case I’d think we’d be risking the wrath of caregivers checking the AmEx bills…
My son works as a call center employee for DirecTV, and he told me the tale of a customer who was upset with the company over a billing dispute. He paid the bill, which was around 500, with a lot of individual credit card transactions for .01 each. There was nothing the company could do, and it definitely cost them more in fees than they received from the customer.
Sounds like an urban legend to me.
That’s 50,000 transactions - at 30 seconds/transaction it would have taken him 17+ days of work to make all those charges.
I agree it sounds like a UL, also not directly analogous to the charity question, since companies are required by law to accept payment for their bills (not sure if they can restrict method) while a charity is never required to accept any donation. A charity likely WILL accept any and all donations (see Duke’s excellent explanations in this thread) but they will not be compelled to do so. Which is why just about any charity’s online forms have a minimum of $5 or even more.
There are lots of other reasons not to accept a donation - sometimes the strings attached are too much, or the donor is for some reason not someone the org wants to be associated with, or something else entirely. Most nonprofits aren’t just indiscriminate money-seekers, cramming all available pennies in an ever-hungry maw. First and foremost is the mission, and any fundraising needs to support the mission both by raising funds but also by living up to the mission itself. So a church isn’t going to hold a fundraiser where angry atheists can buy raffle tickets for a chance to piss in the communion wine, even if their market research shows it could net millions for their roof-repair fund. More realistically, a college might turn down an endowment for a chair in a discipline that the college feels is unsustainable or not a good fit - like say the “Mitt Romney scholar of Nuclear Physics” at RISD. Not that RISD necessarily dislikes the Mitten, or has anything against nuclear physics, it just wouldn’t fit into the curriculum of the school and would be a waste overall. So, better to refuse the Romney donation outright if he won’t compromise. And since the endowment wasn’t payment on a debt (as in the DirectTV example above) the college is well within its rights to do so.
It wasn’t a charitable gift, but I paid $0.01 to an Amazon merchant in December. My brother bought a new cell phone for his daughter and suggested that I buy her a case for it. An Amazon merchant offered a case for that model phone for $0.01. Usually when merchants have one-penny prices, there is a charge of three bucks or so for shipping, but this offer included free shipping. I was surprised that they didn’t cancel the order, although they didn’t send the case that I wanted. (They sent a stylus with an apology that they weren’t able to fulfill the order.)
We think alike.
I just donated $0.01 to these clowns by paypal. I know that at the very least the net will be $0.00. Will it cost them anything? Maybe nothing more than time but that’s ok. It sends a message to them that some of us have no use for their cause.
As a political party unit, we have a similar range of response.
We accept any donation, no matter how small. But the time & effort we soend on responses varies.
Small donations (less than $5) just go in lumped together – we don’t even bother to record the names & addresses of those donors. Legally, we can do this for any donations of $20 or less. But we only do that for the smallest ones.
Medium donations ($5-$19.99) are accepted & recorded. The donor gets a standard (non-personalized) Thank-you note in email if they gave their email in th documentation. But nothing sent in the postal mail.
Donations of $20 or more get accepted & recorded, and reported in Campaign Finance reports. They get an email acknowlegement that same day, and then a personalized Thank-you note & a receipt mailed to them soon thereafter. Plus they’re added to the mailing list for future events.
Anything larger ($50 and above) get all the above, plus additional, like handwritten notes from the candidate or even a phone call from them.
Typically large charities have 50% overhead. Most of it (IMO) goes to the salaries of the big shots at the charities.
Most Universities have almost the same overhead too for research dollars.
I had a credit card that got on my shit list when I was young(er) and (more) immature. I found I couldn’t put through multiple $.01 payments every day, but I could put through an unlimited number of payments every day as long as they were different amounts. I used a macro recording program to pay my 35 monthly minimum with 15 payments per day from .01 to $.15 all month long. I scheduled 2600+ payments for the next six months paying a grand total of just over $200. They were processed as individual transactions and I probably screwed my bank just as bad as I screwed them. My monthly statements were fat as hell.
When I tried to schedule more payments a few months later there was a limit on the number of pending payments allowed at one time and also the number of payments per day. I marked the last day of macro scheduled payments and paid off the card when the fun was over and let them keep it on the books without any activity for a few years until they closed the account.
Revenge is a dish best served by a petty asshole.
Tyler Cowen wrote about using this strategy to subvert nonprofits in his book Discover Your Inner Economist:
Nonsense, even for an extremely generous range of “typically”.
Quite right.
Our State Attorney General’s Charities Unit starts an investigation on any charity where overhead exceeds 30%. Actually, anything 25% or above they start watching that ‘charity’.