Card fees carve out millions from political contributions

The explosive growth in online political contributions is helping to make this the most expensive presidential campaign in history.

But lost in the money pipeline is the cost of point-and-click donations.

An Arizona Republic analysis of campaign expense records shows that organizations that process credit-card transactions have collected more than $11 million in fees for handling Internet contributions and related services.

Candidates in both parties, including the three major candidates still in the race, have divided the processing fees among several organizations, with some turning to openly partisan sources to process the bulk of their donations, the analysis shows.

One company, which presumptive Republican nominee John McCain uses, did work for the 2004 Swift Boat attack effort on Democratic nominee John Kerry.

Processing fees are routine in all credit-card transactions, whether buying coffee at Starbucks or donating online to a charity. The fees are a safety and convenience expense usually hidden from consumers. But in the political realm, it means a portion of a contribution is gone before the candidate ever gets it.

"Every time you use a credit card, the (campaign loses) a little bit," said Julie Barko Germany, director of the Institute for Politics, Democracy & the Internet at George Washington University. "That's a large chunk of change, and it adds up."

However the overhead is seen as a worthwhile expense because research suggests online contributors typically give more than donors who write checks. And the personal information collected means campaigns are able to know more about their supporters than ever before.

Campaign officials for McCain and Democratic candidates Hillary Rodham Clinton and Barack Obama declined to discuss fees or companies associated with processing their online contributions or even how much of their contributions come in that way.

"We aren't going to get into our fundraising strategies," said Jeff Sadosky, a spokesman for the McCain campaign. He would say only that online contributions were "robust."

Politics plays part

Campaign expense reports show that McCain, the Arizona senator, has paid at least $686,000 for processing of online donations and related services. Most of that went to eDonation.com, part of the Donatelli Group, a conservative political support firm.

From January 2007 through March, McCain has raised more than $75 million.

Clinton raised nearly $176 million in the same period, and Obama raised nearly $235 million. Together, Clinton and Obama have paid more than $5 million to several companies to process online donations and perform other services. One of those companies is ActBlue, a political action committee that supports candidates in the Democratic Party. Obama has used the company far more than Clinton.

Federal campaign records don't require candidates to identify how contributions were raised, so it is unclear how much has been collected online vs. traditional methods. That also makes it difficult to gauge what percentage of donations went to processing fees.

Typical merchants, such as Starbucks, pay fees to credit-card companies that amount to a percentage of the purchase. The percentages routinely range from 1% to 4%, depending on the type of card a customer uses and the type of account a merchant has.

In 2006, American merchants paid $57 billion in fees to accept payment, according to Adam Levitin, a Georgetown University law professor.

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