In the past, we've encouraged churches to use Zelle for the benefits they offer. But at this time, we can't recommend that churches use Zelle's platform for accepting donations online.
Let's talk about why...
Zelle is a popular platform used by churches for one BIG reason: They offer no fees. This is really appealing for churches because they want to minimize the expenses of accepting donations online from a credit or debit card. With Zelle, the banks cover the fee (for now), so you can keep 100% of what's donated. What's not to love, right?
However, there's a risk when using Zelle. And this risk has gained a lot of notice lately...
Federal regulations require banks and credit card companies to not only protect your money but also cover the money lost to scams. If a person's account is hacked or even if they willingly wire money to someone who turns out to be a fraudster, the bank is accountable for replacing those funds. Those same regulations were thought to apply to p2p mobile apps like Zelle.
There's a concerning development, however. As users of the platform have reported fraud to their banks, more and more of them are receiving denials. This even occurs in instances where the scammer gained access to the user's bank account through Zelle and drained all their funds.
This New York Times article is the best report on this issue I've come across. Give it a read.
When it comes to church donations, Zelle misses the mark on many of the features ministries need. Some of the issues leaders have told me:
This is so important that we devoted an entire hour to discussing the hundreds of online giving platforms and how to choose the right one for your church. And of course, we covered Zelle! Watch the video below to learn more:
For most church leaders, the preferred way to accept donations online is through the Church Software they already have. Most Church Management Software companies integrate with online giving providers to do this. This approach is often the most cost-effective and easiest to manage at scale.
ChurchTrac integrates with Stripe for Online Giving. Stripe boasts industry-leading fraud protection (and very low transaction fees). That means you and your members can trust Stripe to be safe and secure.
Can a church use Zelle for donations?
Of course, churches can use apps like Zelle, Cash App, Venmo, and other peer-to-peer payment apps for donations. But these platforms are not designed for nonprofits and can expose churches and members to certain risks.
Does Zelle charge a fee for donations?
The reason churches like to receive donations through Zelle is that they are an accessible platform for many churches to save money on transaction fees.
However, don't let the "no fees" promise lure you in. The risks likely outweigh the benefits.
What are the new IRS rules for Zelle?
With most peer-to-peer giving apps, like Venmo and Cash App, more than 200 transactions or $20,000 in taxable income results in that company submitting a Form 1099-K to the IRS. The IRS recently changed its rule to require anyone receiving more than $600 on the platform to produce a Form 1099-K.
As of right now, Zelle is not subject to the rule. But that just means Zelle is not compelled to produce the Form 1099-K to the IRS on your behalf. You will still have to record all income when filing your taxes, even if you received that income through Zelle.
Will Zelle refund money if scammed?
Zelle and the banks have become much less likely to cover money lost through scams and fraud. This means both your ministry and your members are not protected from fraud on this platform.
Zelle is not the best platform for charitable contributions or online donations. Even if they address the security issues, it's still missing vital features that churches need for their regular tithes and donations.
Stepping away from Zelle will be tough for a lot of ministers. Hopefully, banks will come up with a resolution that protects Zelle users while adding the giving features that churches need. We'll keep you posted in the meantime.