Charities: some winners some losers

While SOS Children reports that the last three months were all in the best three months of all time for new direct debits, some charities are feeling the pinch as more people are canceling their direct debit payments during the recession, research shows. The high sign-up for SOS Children which has a very low cancellation rate suggests that there is "flight to quality" from people who made impulse commitments on the street and are now thinking their giving through.

One in four charities has seen donations drop, according to a survey by the Charity Commission. Monthly cancellations rose from an average 3.32% in 2007/08 to 4.64% in 2008/09, said Rapidata, which handles payments for some charities. The average monthly cancellation rate in 2008/09 has gone above 5% four times.

SOS Children has not seen significant cancellation but it has never done "street sign ups" where cancellation rates are generally much higher than traditional committed givers. "Our highest cancellation rate in a month has certainly never reached one percent let alone 5%" said Andrew Cates, CEO. "Our donors seem very understanding that when times are difficult for them, times are even more difficult for children with no one. We have had no detectable increase in cancellations and new direct debits are running at an all time high, even though we have no active campaigns. People seem to be taking much more care choosing charities but that obviously benefits us and in the long run has to be good for the whole charitable sector."

Scott Gray, Rapidata managing director, told the BBC that the trend shows charities needed to focus on new ways of hanging on to donors.

"Our analysis shows that from April 2003 until the summer of 2007, there had been an overall fall in average monthly cancellation rates, which was a very positive trend, said Gray. "But that trend was abruptly halted and violently reversed.

"Cancellation rates skyrocketed last summer so that, for example, in July, 54% more people cancelled their direct debits than in the average July for the pre-recession period, while in December, there were 67% more cancellations than for the average pre-recession December.