PayPal for nonprofits: 7 major advantages and disadvantages
Nonprofit organizations have more fundraising tools at their fingertips than they’ve ever had before — and it’s not a moment too soon. On top of raising awareness, distributing money and goods, and keeping operations afloat, modern nonprofits now have to keep up with new technology demands and payment trends to raise money effectively.
With all the available options, you may be wondering where PayPal fits within your fundraising toolkit. Is it a convenient standalone option to accept donations? Is it a useful add-on to a full fundraising platform?
We’ve got answers. Use this article as your quick and easy guide to PayPal for nonprofits. We’ll go over PayPal pricing, the major advantages and disadvantages of using PayPal for nonprofit fundraising, and a PayPal alternative.
How much does PayPal for nonprofits cost to use?
The reality is that cost is one of the biggest influencing factors in any nonprofit’s decision-making process. So, let’s address PayPal’s account costs and fees upfront.
To accept donations with PayPal, you’ll need to set up a PayPal Business account. Setup is fairly straightforward, and there are no platform fees, monthly fees, sign-up fees, or cancellation fees. Although the payment platform is free, there’s the matter of payment processing costs.
The standard rate to accept credit cards and debit cards on PayPal is 2.9% and 30 cents per donation. There’s good news, though. U.S. nonprofit organizations registered as 501(c)(3) charities receive a discounted rate. If you use PayPal to accept nonprofit donations, you’ll actually pay 2.2% + $0.30 per transaction.
Let’s do some quick math using that rate. According to Nonprofits Source, the average online donation amount is $128. If one of your supporters makes a one-time $128 donation, you’ll receive about $124.88 after processing costs. And if a supporter donates $326, the average annual donation total for recurring donors, your nonprofit walks away with $318.53.
While a few missing dollars might be fine every once in a while, if you have hundreds or thousands of donations, it’ll add up quickly. Not every platform makes nonprofits cover their own payment processing costs.
Givebutter, for instance, lets your donors opt to cover these fees — and they do so 95% of the time. (Learn more in our Givebutter vs. PayPal breakdown.) That said, PayPal’s rate is in line with most payment processing options.
Now, let’s dive into the other major PayPal pros and cons.
Advantages of PayPal for nonprofits
Here’s a roundup of the top benefits when using PayPal to raise money for your nonprofit:
1. Trusted, recognizable name brand
PayPal is one of the largest global digital payment platforms. It’s PCI-compliant, well-known, and widely recognized as a convenient e-commerce payment solution. However, it isn’t just for business.
According to PayPal, more than 600,000 nonprofits use it for fundraising across platforms like eBay, Facebook, and Airbnb.
The brand familiarity could pay off for your nonprofit, especially if your organization is international. One poll showed that 40% of donors would not have given to a nonprofit if PayPal wasn’t an option. And 79% of donors feel confident using PayPal to send payments on unfamiliar websites. At a time when many Americans are concerned about personal data breaches, stolen card information, and insecure transactions, that number is a big deal.
If your customers have a PayPal account, they can send online donations without having to enter their credit card or bank account information at all. And with Express Checkout, they can stay logged in and quickly complete transactions.
2. Mobile-first donation platform
PayPal is also a mobile-first payment platform. As giving increasingly moves online and mobile, this could result in donation boosts for your nonprofit. In 2019, half of all nonprofit site visits came from users on mobile devices. Furthermore, these mobile users generated 25% of nonprofits’ revenue. These figures are only projected to increase as millennials and Gen Zers start joining the donor pool.
It only takes four steps to add PayPal’s donation button to your website. An optimized site and mobile experience have a huge impact on giving. It means fewer users will drop off in the middle of checkout due to a clunky online form, missing button, or an annoying amount of scrolling and clicking.
Supporters giving in-person donations can also enjoy a convenient mobile experience via PayPal Here. You’ll purchase a card reader and download the app to get started.
3. Variety of useful integrations
Finally, PayPal has a collection of third-party integrations with fundraising platforms. These integrations help fill the gaps in its payment platform and help nonprofits manage their donation process. (Givebutter is one of them!)
If you’re already using fundraising software or a customer relationship management (CRM) system, it’s relatively simple to add PayPal as a donation option. That way, you can add ease of giving for your current donors and increase your reach to new donors. In addition, donor information will feed into your CRM from PayPal, removing the need for manual data entry.
Disadvantages of PayPal for nonprofits
Now, let’s go over the aspects that aren’t so great when you’re collecting donations with PayPal:
1. Difficult to avoid credit card processing fees
As we mentioned earlier, payment processing costs can end up taking a big bite out of your critical donation revenue. At 2.2% + $0.30, nonprofits will lose a little over $3 on every $100 donation, at a minimum.
What PayPal doesn’t make obvious is that these transaction rates vary depending on how you accept payment. For example, if you type in someone’s credit card number, your transaction fee goes up.
By contrast, the Givebutter platform is free, and users pay a 0.5% fee on average. Most donors elect to cover the processing costs so that every cent goes straight to your organization's bank account in support of your cause.
2. Lack of fundraising features
As a nonprofit organizer, you know that slapping a donate button on your website, social media, and email won’t cut it. Giving is a passionate, inspired act — it shouldn’t feel transactional. Yes, PayPal lets you accept online donations. But it doesn’t provide the fundraising experience that’s going to attract supporters and keep them coming back.
There’s no way to create an engaging fundraising page, set up events or sell tickets, or contribute to a lively supporter feed. With PayPal for nonprofits, you can add your brand’s logo to the donation form, and that’s mostly it for creative license.
3. Limited payment methods
Credit cards and debit cards are popular payment options to be sure, but they’re not the only options anymore. Consumers are rapidly adopting Venmo and mobile wallets like Apple Pay and Google Pay to send stress-free payments. Moreover, nonprofits are among the most avid users of text-to-donate fundraising campaigns.
Yet a PayPal nonprofit is limited to accepting traditional card payments, Venmo, or donations via a PayPal account.
4. Potential account instability
PayPal is a third-party payment processor, which means it bundles user accounts into one large merchant account to minimize risk overall. This makes it easier for nonprofits and businesses to be approved for signing up. But because individual accounts aren’t thoroughly evaluated and greenlit beforehand, accounts are more likely to be suddenly frozen or closed due to a suspicious or unique transaction.
While this is an unlikely scenario for most nonprofits and business types, it's worth mentioning as a common problem for small businesses. For instance, if your nonprofit suddenly receives a $5,000 PayPal donation, and your average donation is $100, it could potentially trigger an account hold.
The best of both worlds
Is PayPal for nonprofits the right call for your day-to-day donations and fundraising campaigns? With a limited number of payment methods, lack of events or online fundraising pages, and inflexible payment processing costs, PayPal functions more like a rigid donation page rather than a complete fundraising solution.
The good news is that you don’t have to decide between the two. You can maximize your capital — and minimize stress — by signing up for a free Givebutter account and simply adding PayPal as an online payment method.