By Karen October 8, 2025
Nonprofit organizations and educational institutions rely heavily on donations and tuition payments to sustain their work, but the growing reliance on electronic payments brings both advantages and challenges. Donors and students alike expect to pay online, often using cards or digital wallets, which increases convenience but also brings additional costs in the form of network fees. Among these fees, the Fixed Acquirer Network Fee (FANF), interchange rates, and processor markups can take a portion of every transaction, reducing the net revenue available to fund programs or educational services. While businesses often absorb these costs as part of their operating expenses, nonprofits and educational organizations face tighter margins and more scrutiny from stakeholders. Understanding how donations are categorized by Merchant Category Codes (MCCs), how FANF applies, and how network fee visibility can be improved is essential for transparency and sustainable financial management.
In 2025, donors expect their contributions to be used efficiently, and students or families paying tuition want confidence that institutions are handling payments responsibly. Yet many organizations still struggle to fully explain where fees are going, why they exist, and how much impact they have on the bottom line. By learning the mechanics of MCC assignments, FANF rules, and the importance of fee transparency, nonprofits and educational providers can make more informed decisions. This knowledge not only helps reduce financial surprises but also builds trust with donors, parents, and the wider community.
Understanding Donations in the Payment Ecosystem
Donations are at the heart of nonprofit funding, but in the payment ecosystem, they are treated like any other transaction. When a donor gives using a credit or debit card, the payment flows through card networks, acquirers, and processors before reaching the organization. Each step adds a cost in the form of interchange fees, processor markups, and in some cases, FANF. Unlike retail purchases, however, donations are not tied to a physical good or service. This creates unique considerations around fraud risk, chargebacks, and regulatory compliance, especially when donations come from international donors.
For educational institutions, tuition payments are typically larger in value but still subject to the same network rules. Families may prefer card payments for convenience or to earn rewards, but the fees absorbed by the institution can be significant. A $10,000 tuition payment processed by card may result in hundreds of dollars in fees, which can be challenging for schools operating on limited budgets. Nonprofits face a similar issue on a smaller scale with recurring donations. While digital giving platforms make it easy for donors to commit $20 or $50 each month, the cumulative network costs eat into the funds available for mission-driven activities.
The Role of Merchant Category Codes (MCCs)
Merchant Category Codes are four-digit identifiers assigned to organizations by card networks based on the type of goods or services they provide. For nonprofits and education, MCCs determine how transactions are categorized, which in turn influences interchange rates, FANF classification, and donor perception. For example, MCC 8398 is commonly assigned to charitable and social service organizations, while MCC 8211 covers elementary and secondary schools, and MCC 8220 covers colleges and universities.
MCCs matter because they affect both the cost of processing and the eligibility for donor rewards programs. Some card issuers promote bonus points or cash-back incentives for charitable donations, which can encourage giving. On the other hand, certain MCCs may result in higher fees if networks consider them higher risk. Misclassification can also create problems. If a nonprofit is assigned the wrong MCC, it may pay more in fees than necessary or lose access to specialized processing programs designed for charities. Ensuring accurate MCC assignment is therefore a critical step in controlling costs and maintaining fair treatment in the payments ecosystem.
How FANF Applies to Nonprofits and Education
The Fixed Acquirer Network Fee is a monthly charge levied by Visa and passed along to merchants by processors. FANF is meant to cover the cost of maintaining the Visa network, and its application varies depending on business type and transaction profile. For brick-and-mortar businesses, FANF often relates to the number of physical locations. For card-not-present merchants, such as online nonprofits or digital tuition payment portals, FANF is based on transaction volume.
Nonprofits and educational institutions often find themselves in the latter category because many of their payments occur online. This can push them into higher FANF tiers as recurring donations, tuition installments, and event fees accumulate. For small nonprofits, FANF may represent only a minor cost, but for large universities or national charities processing thousands of small donations, it can become a substantial recurring expense. Since FANF is not negotiable, organizations must focus on predicting its impact and budgeting accordingly. Clear understanding of how FANF is triggered helps avoid financial surprises and ensures that fee structures are explained properly to boards, donors, and trustees.
Why Network Fee Visibility Matters
Transparency in fees is essential for nonprofits and educational institutions. Donors want to know that their contributions are reaching the intended programs rather than being consumed by hidden costs. Unfortunately, payment processing statements are often complex, with multiple line items that make it difficult to see exactly what portion of fees are tied to FANF, interchange, or processor markups. Without clear visibility, organizations struggle to answer donor questions and may underestimate the long-term impact of these fees on their budgets.
Improving fee visibility begins with choosing the right processor. Some providers specialize in nonprofit and education sectors and offer simplified reporting that breaks down costs by category. Others provide dashboards where finance teams can track transaction volume, FANF thresholds, and total fees in real time. Fee visibility is not just about internal accounting—it is also about building external trust. When nonprofits disclose processing costs as part of their financial reporting, it demonstrates accountability and strengthens credibility with donors and regulators alike.
Balancing Convenience with Cost
One of the ongoing dilemmas for nonprofits and educational institutions is balancing payment convenience with cost efficiency. Donors are more likely to give when they can use cards or digital wallets, and families appreciate the ease of paying tuition online. Removing these options might reduce costs but would almost certainly reduce participation and satisfaction. The challenge lies in offering convenience while also managing the fees tied to these payment methods.
Some organizations choose to absorb the fees as part of their operating costs, while others encourage donors or families to cover them by presenting the option during checkout. For example, an online giving platform might ask whether a donor would like to “cover processing fees” to ensure 100% of their intended gift goes to the organization. Many donors willingly agree, but not all. Educational institutions sometimes build fees into tuition structures to account for card payments. Each approach comes with trade-offs, but the ultimate goal is to balance accessibility with financial sustainability.
Recurring Donations and FANF Implications
Recurring donations are the lifeblood of many nonprofits. They provide predictable revenue streams that help organizations plan ahead. However, these recurring payments often fall into card-not-present categories, which push organizations into higher FANF tiers. A donor giving $20 per month may not seem significant, but when multiplied by thousands of donors, the transaction volume quickly escalates. This creates a dynamic where recurring giving drives both sustainability and increased costs.
The same applies to educational settings where families pay tuition in monthly installments. While it makes education more accessible by spreading costs over time, it also generates high transaction counts. Organizations must be mindful of how these structures impact FANF obligations. One strategy is to encourage annual or semi-annual payments instead of monthly ones. Another is to diversify payment methods by offering ACH transfers, which often come with lower fees. By carefully managing recurring billing strategies, nonprofits and educational providers can reduce unnecessary expenses while still offering flexible options.
The Role of Processors in MCC and FANF Management
Processors play a critical role in how nonprofits and educational institutions are classified and billed. An experienced processor can ensure that MCC assignments are accurate, FANF is applied correctly, and reporting is transparent. In contrast, a processor unfamiliar with nonprofit needs may leave organizations misclassified or paying higher fees than necessary. When choosing a processor, it is important to ask detailed questions about how MCCs are assigned, how FANF is tracked, and what tools are available for monitoring fees.
Some processors also offer specialized programs for nonprofits that provide reduced rates or bundled services. While FANF itself cannot be eliminated, these programs may offset costs in other areas, such as gateway fees or chargeback management. For educational institutions, working with a processor that can handle both large tuition payments and smaller incidental charges is equally important. The relationship with the processor is not just transactional; it is a partnership that can directly influence financial efficiency and donor satisfaction.
Building Transparency into Donor Communications
Donors increasingly expect transparency from the organizations they support. This extends beyond program outcomes to include how money is managed at an operational level. Some nonprofits have begun disclosing payment processing costs in their annual reports or on donation pages to show donors exactly how much of their contribution goes directly to mission activities. While this level of detail may not be necessary for every organization, it demonstrates accountability and builds trust.
Educational institutions can take a similar approach with tuition billing. Explaining how processing fees are handled, whether absorbed by the school or passed on to families, helps prevent misunderstandings. In both sectors, communication is key. When donors and families see that an organization is upfront about costs, they are more likely to accept them as a necessary part of modern payment infrastructure. Transparency turns a potential liability into an opportunity to strengthen relationships and demonstrate integrity.
Future of Payments in Nonprofits and Education
The future of payments in nonprofits and education will continue to evolve as technology and donor behavior change. Digital wallets, real-time payments, and even cryptocurrency are increasingly being explored as alternatives to traditional card payments. Each of these options has its own cost implications, and their adoption could reshape how FANF is applied in the coming years.
Nonprofits and schools must stay proactive by monitoring payment industry trends and adapting their strategies. While FANF is unlikely to disappear, shifts in regulation or technology may create opportunities for cost savings. Open banking initiatives and direct bank-to-bank transfers could eventually reduce reliance on card networks, lowering exposure to fees. For now, organizations must work within existing structures but remain agile enough to pivot when better options become available. Preparing for the future ensures that nonprofits and education providers can continue delivering on their missions without being constrained by avoidable financial inefficiencies.
How International Donations Affect Fees
Nonprofits and educational institutions increasingly attract donors from outside their home country, especially in a globalized digital landscape. While international contributions are valuable, they bring added complexities in terms of fees. Card networks treat cross-border transactions differently, often applying higher interchange rates and currency conversion costs. For organizations already navigating FANF and domestic transaction fees, the added burden of international processing can significantly reduce the net donation received. A $100 contribution from an overseas donor may ultimately deliver only $90 or less once all fees are deducted.
Educational institutions also face this issue with international students paying tuition. Families may prefer using cards for convenience, but the larger transaction sizes amplify the fee impact. Moreover, foreign cards sometimes trigger additional scrutiny or fraud-prevention checks, which can delay deposits. Organizations must decide whether to absorb these costs, pass them on, or provide alternative methods like international bank transfers and digital wallets. While absorbing fees may appear donor-friendly, doing so at scale can drain budgets. Transparent communication and offering multiple payment options are critical strategies to ensure international giving remains sustainable.
Technology Tools for Fee Monitoring
Managing payment costs effectively requires more than reviewing monthly processor statements. Nonprofits and educational providers now have access to technology tools that offer real-time visibility into fees, transaction volumes, and FANF thresholds. Modern donor management systems and financial dashboards integrate directly with payment gateways, breaking down fees by type and highlighting inefficiencies. With this level of transparency, finance teams can pinpoint whether higher FANF charges are tied to recurring donations, one-time campaigns, or tuition payments.
For nonprofits, this visibility helps explain financial realities to boards and stakeholders. For schools, it supports better tuition planning and reporting to trustees or parent associations. Some platforms even include predictive analytics that estimate how changes in billing cycles or donor behavior will affect FANF obligations in the future. By adopting these tools, organizations can shift from reactive to proactive fee management. Instead of being surprised by end-of-month statements, they can make informed adjustments throughout the year, ensuring fees remain under control without compromising donor or student experience.
Comparing Traditional Giving with Digital-First Donations
Traditional giving methods such as checks, cash, or bank transfers once dominated nonprofit fundraising and tuition payments. These methods carried fewer or no network fees but lacked the speed and convenience of digital transactions. Today, donors overwhelmingly prefer digital-first methods like credit cards, debit cards, and mobile wallets. This shift benefits nonprofits and schools by accelerating cash flow and making giving or payment easier, but it also introduces FANF and interchange costs that were less of a concern in the past.
The trade-off is clear: digital-first methods increase participation and accessibility, while traditional methods reduce costs but may limit engagement. Many organizations now use a hybrid approach, offering donors and families both digital and traditional options. Encouraging bank transfers for larger tuition or donation amounts while keeping cards available for smaller, recurring transactions is one strategy. By aligning payment methods with transaction size and donor preference, organizations can strike a balance between reducing fees and maintaining convenience. This blended approach acknowledges the reality of modern giving while still managing financial efficiency.
Regulatory Pressure and the Push for Transparency
Regulators around the world are increasingly focused on the transparency of fees in the payments industry, and nonprofits and educational institutions are not exempt from these developments. Governments and oversight bodies recognize that organizations serving the public good should not be unduly burdened by hidden costs that reduce their ability to fulfill their missions. As a result, there is growing pressure on payment processors to simplify statements, disclose all fees clearly, and ensure organizations understand the true cost of each transaction.
In the United States and Europe, conversations around interchange caps and nonprofit-specific fee reductions are gaining traction. Some regions already provide lower interchange rates for charitable donations, though FANF and other network fees still apply. Educational institutions may also see regulatory involvement in tuition payment processing, particularly where fees affect affordability. For nonprofits and schools, staying informed about regulatory changes is crucial. Advocating for fairer fee structures through associations or coalitions can also amplify their voice in shaping policy. Transparency is not only a financial necessity but also an ethical obligation, ensuring that stakeholders trust the organization’s stewardship of funds.
Conclusion
Nonprofits and educational institutions occupy a unique position in the payments ecosystem. Their reliance on donations and tuition payments, combined with the expectation of transparency and trust, makes managing fees like FANF and interchange especially important. Merchant Category Codes influence classification, FANF applies based on volume and transaction type, and network fee visibility is crucial for building trust with donors and families.
While these fees cannot be eliminated, they can be managed through accurate MCC assignments, careful billing structures, and transparent communication. By balancing convenience with cost and planning for the long-term implications of recurring transactions, nonprofits and educational providers can sustain their missions while meeting modern payment expectations. In an era where digital payments dominate, understanding the relationship between donations, MCCs, and network fee visibility is not just about saving money—it is about protecting the integrity and sustainability of the organization itself.