We used PayPal the last two years at our auction; they have a special 2.2% fee for 501(c)(3) non-profits, which doesn't seem outrageous. However, they also want a $30/month fee for "Virtual Terminal" if you're entering the credit cards yourself (versus asking people to send the payment when they get home from the auction?).

This year, another school found InnerFence, which has an iPhone app and and a credit-card reader that connects to your iPhone. They had a promo (ended yesterday) where they would give you the reader free when you open the account. The account costs something like $25/month; I'm not sure how easy they make it to suspend the account for the 11 months you're not running an auction. With the reader (which reduces the chance of mistyping a CC number), they say they charge only 1.74%. I think this might work well even in places you don't have a phone line or wifi.

Last bit on credit-cards for today, then I'll stop.

So if you are going to set up a credit-card processing account, what kind of information will you need, and how long will it take?

You will most likely need:

1) A copy of your PTO's state-registration paperwork; showing the PTO's address and tax ID#
2) The names, addresses and social-security numbers of your PTO President and Treasurer.
3) Copies of the PTO's Balance Sheets and P&L statements for the last two years.
4) A voided check for the account where you want the funds deposited

The form is usually one or two pages, with a few pages of terms to initial at the end. You fax it in, wait 7-10 days, then you're done. The total effort is usually less than 10 hours, and most of that is spent looking for paperwork.

Try to find a credit-card processor (aka "merchant-account provider") who will not make your officers sign a personal guarantee against any chargebacks; if you have two years worth of statements you should be able to do so. I can point you toward a few, including the one I went to for my kid's schools' auction this year.

Feel free to contact me directly if you want to talk directly.

Roger Devine

So, if you decide you need to accept credit-card payments, how do you make sure you are not paying higher fees than you have to?

You can turn this into as big of a research project as you want, and I can help you break down all of the various categories of costs if you'd like, but here are three shortcuts to that big project that work pretty well:

1) If the school or PTO already has an existing credit-card account, check into the transaction fees that come with that account. Even if they are a little higher than you can find elsewhere; the fact that you don't have to hassle with setting up a new account, and pay the setup fees on that account, makes this a reasonable choice.

2) Eliminate as many reseller-middlemen as you can. Your retail bank or credit-union? They are usually resellers for regional ISOs, who are themselves resellers. They mark up the fees on the way to you. The fundraising-auction-specific credit-card processing services? They routinely tack 2% on to the fees that the underlying banks set. It used to be that the ISOs didn't really want to deal with PTOs and small non-profits who needed accounts for fundraising events; that's why these auction-specific vendors found a niche to build a business in. But there are now plenty of ISOs who understand this market and are willing to sell to you directly. Contact me if you want a list of a few.

3) Don't be tempted to use PayPal. It's incredibly easy to use; they market it at people and organizations who find the whole process of getting an account to be scary. They also charge you for the convenience.

More in the next post.

Roger Devine

In order to figure out whether you should take credit-cards for payment at your auction, my advice is to start by looking at your procurement effort, and what you think the range of guest payment totals will be at the end of the evening - and what you WANT those to be.

Easy example #1: you are running a silent auction only, with 130 guests and have procured 50 items from local businesses, worth roughly $3,000. 130 guests usually equals somewhere around 70 bid numbers, since most couples will share a bid number. You can anticipate that the average winning bid will be about 80% of the Fair Market Value, so that's $2,400.00 you are going to raise. The average guest payment will be about $35; the high-end big-spender probably spends $350. In that case, I wouldn't bother with cards - bring a cash box; tell your guests to bring their checkbooks, skip the fees.

Easy Example #2: you are running a gala with both a live and silent auction, plus signup parties and a $100/ticket, pick-your-prize raffle where you expect to sell 30 tickets. You expect 280 guests (150 bid numbers); counting signup-party slots, you have 250 items, at a total FMV of $40,000. Your average guest total will likely be $200 or so, but in this scenario, it is likely (from my experience) that very few guests will have an "average" total; 40-50 bid numbers won't spend anything beyond their ticket, 75 bid numbers will spend between $200-$400 each, 20 bid numbers will spend $400-$500; and 5 will spend over $1,000 each. In this scenario, if you don't accept credit-cards, you can reduce each of those total amounts by half or more. It's a no-brainer to take cards then.

I'm going to save here, and address another point in my next post.

Roger Devine

We are also doing our first ever auction this spring. I've heard that using credit cards ends up cutting into your profits because of the high fees the companies charge to use them. Can anyone help me out with info on this? How does your organization handle payment? Thanks in advance for any advice you can provide.

Hi,

I can talk about this for hours, but the basic idea is yes: go either to a bank you have a relationship with already, or to one of the many merchant-service providers who specifically work with schools and non-profits and understand what fundraising auctions are about (there is a list of a few of these here: www.schoolauction.net/partners/).

Good luck, and if you are interested in discussing auction software, you can send me a message.

Roger