Processing political donations through PayPal, Google Shopping Cart, Square, Amazon or Rally.org can seem like the perfect solution for campaigns trying to raise a quick buck. All you need to do is give them your email address and bank information and they send you your money. Right?

Not so fast. These companies, called “aggregators” by the likes of Visa and MasterCard, set up a single credit card merchant account that they share among all their clients. Why would having aggregators processing your credit card donations be a problem? 

Here are eight reasons why you should consider having your own merchant bank account.

(Why aggregators are good for your campaign: A response from Rally.org’s Tom Serres)

You have no control over your funds. How can this be? The reality is that the aggregator doesn’t have to give you your funds until they deem the funds not to be a risk of fraud or not meeting all of their terms of service.  Legally, the funds that you thought were given to your committee are really controlled by the aggregator.  That means that if aggregator doesn’t distribute your funds to you, you have no quick recourse. 

We once saw PayPal place a hold on a client’s funds for six months because the campaign in question didn’t perfectly fit PayPal’s underwriting rules.

Your only recourse option is to sue the aggregator in civil court for damages which no campaign has time for.

Obviously, aggregators wouldn’t be in business long if they withheld funds from their clients, but if your aggregator decides that your have violated their terms or if your aggregator runs into cash flow challenges, you may never see all your donations. 

It's important to note that as a customer of an aggregator, if you do violate the terms of their agreement anytime, they can hold your funds indefinitely and without recourse.

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

You don’t receive your donations when the donor’s card is processed. You will receive your funds from your aggregator based on their terms. That could be as long as once a month, or once every two weeks or whatever arbitrary time period the aggregator decides upon.

There are other issues with you receiving funds only on your aggregators’ schedule. What about September, October or even November when the majority of your donations hit your website? Donations are the oxygen your campaign lives on. If you’re waiting around for your aggregator to disburse your funds before Election Day, how can you use those funds to win your race?

We’ve seen many campaigns not receive their funds until after Election Day, which is often no help at all.

When you have your own merchant bank account, donated funds are transferred to your account as soon as the donor’s credit card clears -- usually one to three business days.

Aggregators are more expensive than having your own merchant bank account. Most aggregators’ business model is to charge their clients a flat percentage of the transaction. What most campaigns don’t know is that the credit card companies charge the aggregator much lower rates and these rates are based on the type of card being processed. 

Dealing directly with the merchant bank creates total transparency between you and your online processing costs. When you have your own merchant bank account, you pay the per-donation transaction costs directly to the merchant bank based on the types of cards your donors use. The merchant bank will give you a report of all transactions and the true fees for each one of those transactions.

The other huge upside to this is that your treasurer can easily see what your committee’s true costs are for processing donations, which makes FEC and state compliance filings much easier.

You lose control of donor chargebacks. One of the best Federal Election Commission and state election compliance practices is for campaign to manage the chargeback process. We recommend that chargebacks are paid to donors with a physical check from the committee. This allows a staffer who is knowledgeable in treasury and compliance to best determine if a chargeback should be issued, challenged or refunded. 

In many cases, it is more profitable and easier for the aggregator to complete the chargeback themselves. This can create a reconciliation nightmare for your treasurer. Did the aggregator report to your treasurer:

•    That the donation in question actually took place.

•    That they processed a chargeback.

•    When the chargeback was completed. 

•    How much are they going to charge you for completing the chargeback?

Chargebacks completed through an aggregator can lead to no end of compliance busy work and bad campaign finance data. When you have your own merchant bank account, you have total control over your chargeback processes.

Aggregators are often not familiar with Federal Election Commission or state donor requirements. Last cycle we had a number of clients who processed campaign contributions with Square, which is a devise that attaches to an iPhone or iPad that allows the fundraiser to accept a credit card payment via a card swipe. Square is an aggregator, and, unfortunately, they don’t request employer, occupation, or contact information for processing a political transaction as required by the FEC.

Our Square-using candidates ended up returning tens of thousands of dollars (and spending weeks attempting to track down donors) because they were unable to collect the proper donor information for the transaction. In many instances the donor’s first name was not even collected.

We’ve seen this same situation when campaigns have tried to implement non-political aggregator donation forms on their website. PayPal and Google Shopping cart don’t know the federal or state donor requirements or gift limits. When you have your own merchant account and utilize a political specific donation form, you can assure yourself of maintaining FEC and state compliance.

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.