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Nonprofit Strategies

PayPal for nonprofits: How to make the most of this platform

PayPal is free to use and offers discounted payment processing fees for nonprofits, but is it the right fit for you? Use this quick and easy guide to find out.

Rachel Mills
December 28, 2023
August 20, 2020
Nerd Mr Butter

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Nonprofit organizations have more fundraising tools at their fingertips than ever before—and it’s not a moment too soon. With all the different ways to raise money online, you may wonder where PayPal fits within your fundraising toolkit. Is it a convenient standalone option to accept donations, or is it a useful add-on to a more robust fundraising platform?

We've got answers. 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.

What nonprofits can and can't do with PayPal

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 breeze. There are just three steps to set up a PayPal nonprofit account to start accepting donations.

How to set up a PayPal account for a nonprofit

  1. Set up: Create a PayPal Business account, connect your bank account, and register your nonprofit in the account settings.
  2. Share: When you're ready, share your custom PayPal.Me link, add a PayPal donate button to your website, or activate the PayPal option at checkout.
  3. Raise money: Collect your funds after transaction fees are taken out for each payment.

Verified 501(c)(3) nonprofits can also apply to receive confirmed charity status from PayPal, which unlocks lower transaction fees and eligibility for PayPal Giving Fund, Venmo’s new charity profiles, and more.

Your supporters can donate with a credit card, a debit card, or money in their PayPal account if they have one. They can choose one-time donations or recurring donations like a $10 monthly subscription, and you can also let them donate to specific programs, such as your school supply drive or playground renovation fund.

Now that you know what PayPal is—a powerful online payment gateway—let’s talk about what it isn’t.

PayPal is not 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.

Fundraising sites like Givebutter offer the same donation button for your website, but you also get access to far more payment methods and fundraising features (including PayPal!).

What you should know about PayPal nonprofit pricing

To accept donations with PayPal, you'll need to set up a PayPal Business account. Setup is fairly straightforward, and there are no platform, monthly, sign-up, or cancellation fees. Although the payment platform is free, there are various payment processing fees you should be aware of.

PayPal fees for nonprofits

The standard rate for accepting credit and debit cards on PayPal is 2.89% + $0.49 per donation, but 501(c)(3) nonprofits can apply to get a reduced PayPal nonprofit rate. If you use PayPal to accept donations as a confirmed charity, you'll actually pay 1.99% + $0.49 per transaction. That means if a supporter donates $50, you'll end up with roughly $48.52 in your pocket.

But while a few missing dollars might be fine every once in a while, PayPal nonprofit fees add up quickly if you bring in hundreds or thousands of donations.

Not every platform makes nonprofits cover their own payment processing costs. Givebutter, for instance, lets your donors opt to cover these fees entirely—and they do so 95% of the time. Givebutter also doesn't charge a platform fee and offers transaction fees at some of the lowest rates in the industry.

PayPal also offers higher tier plans (for increased rates) that 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.

Note: Transaction rates and fees for international donations and PayPal Here vary depending on the type of transaction, so always double-check the final price tag.

Can donors cover fees on PayPal?

On a few places on its website, PayPal states that donors can help cover payment processing fees by increasing their donations to help offset the costs, but we couldn't find additional information about how much donors can actually cover natively.

When integrated with a third-party fundraising platform like Givebutter that enables donor-covered fees, PayPal donors can opt-in to cover the transaction fees completely.

Advantages of PayPal for nonprofits

✅ Trusted, recognizable name brand: PayPal is one of the largest global digital payment platforms that donors can feel confident choosing at checkout and entering their information into. It’s PCI-compliant, well-known, and widely recognized as a convenient e-commerce payment solution.

✅ Mobile-first platform: As giving increasingly moves online and mobile, having a mobile-optimized payment gateway could boost your nonprofit's donations. The PayPal donation button is easy to add to websites and lets people pay with a few taps. An optimized site and mobile experience greatly impact giving, resulting in fewer drop-offs in the middle of checkout due to a clunky online form, missing button, or an annoying amount of scrolling and clicking.

✅ Variety of useful integrations and plug-ins: If you need to fill the gaps in this payment processing platform, you can integrate fundraising, financial, marketing, and project management tools (including a native Givebutter fundraising integration). Plus, 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 and feed donor information into your CRM from PayPal, removing the need for manual data entry.

Disadvantages of PayPal for nonprofits

❌ Unclear payment processing fees that are difficult to avoid: As we mentioned earlier, payment processing costs can take a big bite out of your critical donation revenue. What PayPal doesn't make obvious is that these transaction rates vary depending on how you accept payment. For example, if you manually type in someone's credit card number, your transaction fee increases.

❌ Lack of fundraising features: Even though PayPal lets you accept online donations, 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 about it for creative license.

❌ 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 or donations via a PayPal account.

❌ Potential account instability: Businesses report that PayPal sometimes freezes or closes accounts without warning, leaving you without a way to access your hard-earned donations. For example, if your nonprofit suddenly receives a $5,000 PayPal donation, and your average donation is $100, it could potentially trigger an account hold.

PayPal for nonprofits: The bottom line

How PayPal fits into your donation strategy ultimately depends on what your organization needs.

It's worth noting the positives. Opening a nonprofit PayPal account is quick, easy, and free. The platform offers discounts for nonprofits right off the bat 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. Plus, with a limited number of payment methods and inflexible payment processing costs, PayPal functions more like a rigid donation page rather than a complete fundraising solution.

Most organizations are better off using a fundraising platform and simply adding PayPal as a payment option. Why? Because you can get the exact same PayPal benefits without sacrificing the engaging fundraising tools that help you get to “yes” with your donors.

Get the best of both worlds with Givebutter

With Givebutter, you can offer as many payment methods as you need, including the option to accept PayPal donations. We pool your different donation sources into one account, so payouts for all your campaigns are consolidated into one seamless withdrawal. You don’t even need a PayPal account to accept PayPal donations on Givebutter—and neither do your donors.

Here's what Evan Dolive, CEO of Greater Longview United Way, had to say about making the switch from PayPal to Givebutter:

Givebutter allows my nonprofit to solicit donations quickly, efficiently, and effectively. I love how Givebutter allows the donor to choose to pay the transaction fees, unlike PayPal. Givebutter is saving us a ton in fees alone. We can also create campaigns, ticketing events, and more with ease.

Maximize your capital and minimize stress by signing up for a free Givebutter account and automatically offering PayPal as an online payment method on all of your campaigns.

Get started
Set up your peer-to-peer fundraiser for free in just a few minutes →

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