Aggregators withhold a portion of your funds to compensate for fraud and unanticipated chargebacks. Aggregators have to protect themselves if one of your donors requests a chargeback once your campaign has closed or if they find that some of your donations were made with stolen credit cards. 

Larger aggregators monitor transactions looking for fraud or misuse. If there’s suspicious activity, the aggregator protects itself by freezing a campaign’s account or withhold funds. 

Unfortunately for its users, this approach leaves aggregators very vulnerable to fraud which requires the company to take a shoot first, ask questions later approach to suspicious activity which results in campaign funds being withheld without notice for prolonged periods of time or reserves placed on deposits.

If you read the fine print of most aggregators’ terms, you will see something like, “[We] reserve the right to hold funds for the use of refunds. It is possible that some of the held funds be held for up to 45 day.” 

Aggregators also can keep a “rolling reserve” or “hold back” for all or a portion of funds from fundraising activities in a non-interest bearing account until funds in the account meet a certain balance.

When you have your own merchant bank account, your donated funds are your property as soon as the donor’s credit card clears, but you’re responsible for chargebacks.

The aggregator’s name appears on your donor’s credit card statement. In many cases, a donor will open up their credit card statement and see a charge from Amazon, Rally.org, Google, or PayPal and not have any idea what it's for. Their first move is often to request a chargeback. The best scenario is for your committee’s name to appear on your donor’s credit card statement for any number reasons.

In order to assure your name will appear with each transaction, it’s critical that you set up a merchant account in your committee’s name.

The consortium of credit card companies don’t like aggregators. Aggregators take the underwriting process out of the hands of merchant banks. That means that an aggregator could provide credit card processing to Debby the Drug Dealer, Tom the Terrorist or Mike the Money Launderer without following the credit card companies vetting process. If a credit card company finds a problem with your aggregator, they could pull out and leave you high and dry. 

For these eight reasons, among many others, we recommend that all our clients establish their own merchant bank account even if they begin initially taking contributions with an aggregator. It only takes a couple days, can save you thousands of dollars and protects your committee in innumerable ways.

Erik currently runs sales and marketing for CMDI, the largest Republican fundraising technology platform. Prior to joining CMDI, Erik founded numerous fundraising technology companies whose products have raised over $300 million for hundreds of political and cause-based organizations.

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