PayPal donations: The basics, pros and cons, and alternatives
If you need a way to collect donations online, you may have considered PayPal, a payment processing tool that’s popular with businesses, nonprofits, and individuals across the world.
After all, more than 600,000 nonprofits have turned to PayPal for their fundraising efforts, and roughly seven in eight donors are comfortable using PayPal to make a donation even if they’re on an unfamiliar website.
While PayPal is widely adopted and trusted by givers, it’s not always the most effective way to accept money or launch a donation campaign. Fortunately, it’s not the only option out there.
Below, we’ll walk through what PayPal is, how PayPal donations work, and the pros and cons of using PayPal as your primary donation tool. Then, we’ll give you three PayPal alternatives and explain why they're worth considering.
Overview of PayPal for fundraising💰
First, some quick background on PayPal and why it’s so widely used. To accept credit cards online, you need what’s called a payment gateway. In the past, you’d have to apply for a merchant account and deal with a lengthy approval process to set up a payment gateway.
Often, new or small companies wouldn’t be approved because they couldn’t meet the strict account requirements. Individuals trying to collect money for a good cause had to find other options, too.
Luckily, those days are behind us. Payment gateways like PayPal have made sending and receiving money a no-brainer. There are just three steps to get started with PayPal donations:
- Create a free PayPal Business account and connect your bank account.
- Share your PayPal.Me link, add a PayPal donate button to your website, or activate the PayPal option at checkout.
- Collect your funds after transaction fees are taken out for each payment.
Generally, PayPal charges 2.9% + $0.30 per transaction, but 501(c)(3) nonprofits get a healthy discount. Registered nonprofits are charged 2.2% + $0.30 per transaction. That means if your supporter bought a $50 brunch ticket or gave $50 to your school’s PTA, you’d actually end up with $48.60 in your pocket.
Your supporters are able to donate with credit card, debit card, Venmo, or money in their PayPal account if they have one. They can choose one-time donations or recurring donations like a $10 monthly subscription. You can also let them donate to specific programs, such as your school supplies fund and playground renovation fund.
Higher plan tiers let donors check out without leaving your website and pay with a wider variety of currencies. There’s also PayPal Here, which lets you accept cards in person using a mobile device, card reader, and PayPal app. Transaction rates and fees for international donating and PayPal Here vary depending on the type of transaction, so you’ll need to double-check the final price tag.
Pros and cons of using PayPal to collect donations
Here’s a snapshot of PayPal as a standalone donation tool without any integrations or add-ons:
- PayPal is a mobile-first platform 📲: The modern donation process is migrating to smartphones and tablets. The PayPal donation button is easy to add to mobile websites and emails, and lets people pay with a few taps.
- PayPal is a reliable, recognizable payment method 👀: In one poll, 40% of respondents wouldn’t have donated if PayPal wasn’t an option. Donors can feel confident choosing PayPal at checkout and entering their information.
- PayPal offers many integrations and plug-ins 🔁: If you need to fill gaps in the platform, you can integrate fundraising, financial, marketing, and project management tools. (Givebutter is one of them!)
- Eligible charities can enroll in the PayPal Giving Fund 👏: This program adds options to donate to your nonprofit at checkout on large ecommerce sites like eBay and Humble Bundle. Some donations are fee-free, depending on the site.
- You can’t avoid PayPal’s transaction fees 💸: Although PayPal doesn’t charge monthly fees, you’ll still lose a chunk of every donation to processing fees. (By contrast, Givebutter lets donors pay your processing fees, and 95% do!)
- PayPal lacks important fundraising features 💤: PayPal is designed to help people accept credit cards, not launch fundraising campaigns and attract new donors. There’s little customization and few built-in tools — you’ll need to activate integrations to manage your brand, fundraisers, donors, and volunteers.
- Your payment methods are limited 🔎: Increasingly popular payment tools like text-to-give, Apple Pay, and Google Pay aren’t available. For all your PayPal payments, you can automate donor receipts, but you can’t customize them with your preferred email address.
- Your PayPal account could be on shaky ground 😮: Businesses report that PayPal sometimes freezes or closes accounts without warning, leaving you without a way to access your hard-earned donations.
Check out our full review of PayPal for nonprofits for a deeper dive into the advantages and disadvantages.
Another way to use PayPal for fundraising
Now that we’ve examined what PayPal is — a powerful online payment gateway — let’s talk about what it isn’t. PayPal isn’t a one-stop donation platform. You can’t tell your story, create fundraising pages, sell event tickets, manage a crowdfunding campaign, highlight your fundraising goal, or easily update and thank your donors.
Most fundraising platforms simply let you add PayPal as a payment option. Why? Because you can get the exact same PayPal benefits without sacrificing the fundraising tools that help you get a “yes” to your request.
With Givebutter, you don’t even need a PayPal account to accept or receive donations. You can tap into over 70+ free features to engage your supporters, stay laser-focused on your goal, and offer as many payment methods as you need, including PayPal. We pool your different donation sources into one account, so payouts are a breeze. Explore our platform for yourself.
Top 3 alternatives to PayPal donations
PayPal isn’t the only payment gateway on the block. There are hundreds of other payment processors and gateway providers you can use alone or, better yet, integrate with your all-in-one fundraising platform. Here are three solid PayPal alternatives you can use to accept donations:
With a huge payments ecosystem, Stripe supports millions of users and organizations of all sizes, including nonprofit giants like UNICEF, Charity: Water, and the American Cancer Society. Its payment gateway is powerful enough for large organizations but affordable enough for individuals and small teams.
Stripe works with over 135 currencies and is developer-friendly, providing detailed document libraries so you can customize the platform as much as you need. One of the biggest benefits of using Stripe is the sheer number of apps it can connect to. If you want to hang onto a business management tool you’re already using, or you’re hunting for a platform you can stick with for a while, it’s hard to go wrong with Stripe.
- Payment processing fee: 2.9% + $0.30 per transaction, but you can contact Stripe to learn about discounts for nonprofits.
Authorize.Net is a payment gateway that’s been powered by Visa since 2010 but was established in 1996, making it a contender for the oldest gateway around. It offers many of the features you’ll need to securely accept donations, including mobile payment tools, recurring billing, tons of shopping cart integrations, and anti-fraud protections.
One perk of Authorize.Net is that you can pair its payment gateway with the merchant account you already have, even if it’s with another processor. Your supporters can also save their payment information, so their next donation is lightning fast. Authorize.Net does charge a monthly gateway fee, so it’s not quite as budget-friendly as the other options we’ll cover.
- Payment processing fee: 2.9% + $0.30 per transaction
- Gateway fee: $25 per month
3. iATS Payments
iATS Payments jumps out as one of the only payment gateways designed specifically for nonprofit organizations. The company draws on over 20 years of experience supporting nonprofit needs, providing reliable donation technology, and helping organizations accelerate their mission. They also claim a client retention rate that’s 3.5 times better than the industry standard.
iATS lets you take major credit cards, automate one-time and recurring billing, and connect to hundreds of technology partners — without being a tech wizard. Although iATS provides custom pricing, many customers report processing fees that are higher than PayPal or Stripe after discounts.
iATS Payments fees
- Payment processing fee: 2.49-3.20% + $0.26 per transaction, but you need to contact iATS for specific pricing.
PayPal donations: The big takeaway 👋
How PayPal fits into your donation strategy depends on your nonprofit, business, sports team, school group, or personal cause. It’s worth noting the positives. Opening an account is quick, easy, and free.
The platform offers discounts for nonprofits right off the bat — unlike other payment gateways — and has basic features like custom donate buttons, donation amount suggestions, email receipts, and multiple giving buckets.
But when it comes to long-term fundraising, a payment gateway like PayPal works better as a sidekick. On its own, PayPal is missing the exciting fundraising pages, event signup, social features, and personal touches that motivate donors to give again and again. Get the most out of PayPal by creating a free Givebutter account and adding it as a payment method.