Recurring Donations vs. Memberships – Which to Use and When?
Should your organization offer recurring giving options or a membership program? Or both? These fundraising tactics can both be highly affective when applied correctly, but it can be difficult to decide which is the best fit for your nonprofit. Use this article to compare recurring donations vs. memberships and find your answer!
Have you ever wondered if there was a difference between recurring donations and memberships? Why do online donation tools offer both, and should your nonprofit include both? The answer to this question depends on your organization’s fundraising goals and why you want people to give.
In this article, we’ll explore the similarities and differences between the two and which one your organization may need.
Recurring Donations vs. Memberships
Recurring donations are a way to have a predictable revenue stream for your nonprofit, that enables your donors to give on a weekly, monthly, quarterly, or annual basis. People sign up for these donations to continue to help bring about an impact on the lives of your beneficiaries.
Memberships also help generate predictable revenue, but the primary focus remains on cultivating loyal support and advocacy for your cause. Your members make monthly or yearly payments to your membership program, receiving benefits in return.
Nonprofits can use either recurring donations or memberships. Many use them both and often interchangeably.
The similarities and differences between the two will help nonprofits determine what’s best for their organization and how best to reach out to their donor base.
1. Regular giving
Donors willing to give regularly to your nonprofit can either become members or sign up for recurring donations. Both let you build and strengthen a loyal donor base.
2. Dependable income
Recurring donations and membership fees allow nonprofits to have a dependable income stream for the organization. When you know you’ll collect $10,000 without spending extra funds on a campaign or event, you can better plan for monthly and annual expenses. These are great for creating your annual fund as well.
3. Easy and convenient giving
Donors like to give recurring donations and membership fees because they can sign up and forget about it. The amount is deducted automatically at regular intervals. And they can cancel or change the amount any time they want. This makes the whole giving process convenient for supporters.
Nonprofits also don’t need to remind members or recurring donors time and again about a donation, thus saving them effort and time.
1. Members receive benefits
Membership benefits can range from regular program updates to physical gifts, ticket discounts, free access to events, VIP treatment, or even a role in policy decisions. You can check out the below example to see the benefits they’re offering their members for each membership tier.
Nonprofits that encourage recurring donations may promise donors regular program updates and discounts, but that is usually where the benefits stop.
2. Recurring donations are tax-deductible
Recurring donations are always tax deductible. Donors will use your donation receipts to claim tax benefits for their recurring donations. This example below is a great reference for a recurring donation campaign that clearly explains the tax-deductibility of donations.
Membership fees aren’t always tax-deductible. They only are when the donor does not receive something of equal or greater value in exchange for their gift.
The below comparison table will help you easily grasp the differences and similarities between recurring donations and memberships.
How Should Nonprofits Choose Which to Use and When
The similarities and differences between recurring donations and membership fees are only the beginning. You must ask many questions and take a couple of steps before deciding which to use for your organization.
1. Decide on your goals
What are your biggest concerns? Most nonprofits will have the 2 following objectives:
Memberships are transactional. Those who sign up for a membership will give regularly but expect something in return.
On the other hand, even without benefits, you can encourage recurring donations and increase funds raised from this program. These are split into weekly, monthly, or quarterly gifts and don’t have to include extra benefits.
You can share how a recurring donation of $50 a month can help save them money this month and increase their yearly donation size to $600. Let them also know how this amount can help you make a significant difference in the lives of the needy.
Most donors don’t think like this, so you may be surprised by the response after educating them on this option.
Muso embeds the Donorbox recurring donation form, including monthly and annual intervals, on their website donation page to encourage donations.
1.2 Build a stronger community
The second concern many nonprofits have is to build a stronger community. Many nonprofit organizations are member-based. Their membership program is essential to the nonprofit’s structure and function.
Other organizations offer memberships because they feel it’s the only option to encourage more people to give regularly.
Memberships offer donors certain privileges for their gifts. Nonprofits with something to offer, like chambers of commerce or other professional organizations, often find memberships best fit their goals. Parent-teacher organizations (PTAs) also use memberships to split supporters by how interested they are in actively participating.
Members feel they play a crucial role in the organization and feel a stronger connection with the nonprofit’s goals. These members are more likely to become volunteers or advocates for the organization.
The Wood River Trails Coalition uses the below membership program page to let people from the community become members to give back to the landscape they live in.
2. Decide What you want to offer
If you’re determined to include memberships in your fundraising plan, creating a list of benefits donors will receive is crucial. Remember to focus on what your donors want. It’s useless to create a membership program no one wants.
It’s also vital to let donors know why the total amount of their gifts isn’t tax-deductible. Since memberships offer donors benefits for their contributions, the IRS doesn’t see them as donations. This fact may discourage many from membership.
If your nonprofit has few benefits to offer and you’re not interested in giving donors and volunteers more influence over your organization, recurring donations may be a better option. However, recurring donations would require strategic planning and donor management efforts on your end to acquire and maintain such donors.
No matter which you choose, strengthening relationships with both types of supporters is a must. Your recurring donors may not expect benefits but you must still provide them with regular updates on how you’re using the donations.
It is advisable to have both in your fundraising strategy. It ensures that people who want to closely associate with your organization can become members and receive benefits. While those who still want to help in the best way possible without much involvement can just sign up for recurring donations.
Donorbox Recurring Donations
Donorbox allows nonprofits to include Recurring Donations in the donation forms and campaigns they create on the platform. You can accept weekly, monthly, quarterly, and yearly donations. You can also highlight your preferred donation interval (with a heart icon next to it) on each donation form.
When you create a donation form on Donorbox, you can choose the default recurring interval. That way, donors know which one would be the most useful to you as an organization.
You can embed this form on your website donation page or use it as a popup when someone clicks a button on the website. Alternatively, you can also use the Donorbox-hosted fundraising page that gets created automatically the moment you create a campaign and a recurring donation form. You can also customize this page to add brandings such as your logo, preferred color, and any description, images, or videos.
Your donors also receive a donation receipt with every recurring donation. You can customize this receipt to your liking.
Donorbox Recurring Donations come with no monthly or startup costs. The platform fee will be at 1.75% along with the processing fees of Stripe/PayPal. However, your donors can help cover these fees. You also have the option to reduce the platform fee down to a flat 1.5% rate when you upgrade to our higher plans – Pro and Premium! Learn more here.
We have written this guide to help you understand how to get started with using these forms in the most effective way possible.
Some of the notable organizations that use Donorbox Recurring Donations:
While it is not rather easy to acquire recurring donors, the below video from Donorbox helps you get started on the right note –
Nonprofits looking to build a stronger relationship with donors can use Donorbox Memberships. Nonprofits can offer monthly and annual memberships and create unlimited and customizable membership tiers. Donorbox also lets nonprofits clearly define membership benefits by grouping donors easily based on different tiers.
You can also let potential members pay a custom amount to their liking (great for online tithing options for churches). They’re automatically tied with the suitable tier.
You can embed this membership form on your website or use the Donorbox-hosted membership campaign page to run your membership program. The membership campaign page can be easily customized to reflect your organization’s brand.
Once members sign up, they can track, upgrade, and cancel their membership anytime. You can also manage your members and membership payments on the tool with utmost ease.
Know more about Donorbox Memberships on this guide here.
Donorbox membership tool has no signup or monthly fee, but there is a 2.95% platform fee, in addition to payment process fees of Stripe/PayPal. However, you have the option to reduce this rate to a flat 1.5% when you upgrade to our higher plans – learn more!
Some of the noteworthy organizations that are using Donorbox Memberships:
Check out this demo video on Donorbox Memberships to easily get started right away –
Nonprofits may choose recurring donations or memberships depending on their goals and needs or use both. Now that you understand the differences and similarities between the two, you can create campaigns that best fit your donor base.
Members and recurring donors can add significant amounts to your nonprofit’s bottom line, so keeping donors informed and pleased with their gifts is essential.
Explore other powerful and simple-to-use features of Donorbox, comprising Text-to-Give, Events, Crowdfunding, Peer-to-Peer, QuickDonate, Donor Management, and more. We also have a success package called Donorbox Premium, specially designed for nonprofits that are willing to take their fundraising to the next level. Pricing is personalized for each organization.
Read insightful blogs and get downloadable resources on the Donorbox Nonprofit Blog. You’ll also get plenty of guides on recurring donations and memberships over there. Subscribe to our monthly newsletter to receive our best resources including blogs, podcast episodes, product updates, webinars, and more in your inbox.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.