PayPal For Nonprofits Guide: What You Need To Know About Fundraising & Accepting Donations Via PayPal
Using PayPal to accept donations online is super easy, but nonprofits can also take advantage of PayPal’s many tools and features to fundraise almost anywhere.
Nonprofit organizations have never had as many fundraising tools as they do today. PayPal is one of those nonprofit tools!
You might think of PayPal as mainly an eCommerce platform and digital wallet, but nonprofits should be aware that PayPal offers much more than just a Donate button. In this article, we’re highlighting all aspects of using PayPal for nonprofits — features, policies, and third-party integrations — that can facilitate fundraising, bookkeeping, and other nonprofit needs. We’ll also detail the main alternatives to using PayPal for nonprofit fundraising.
Table of Contents
- Why Use PayPal For Nonprofits?
- Fees & Rates For A PayPal Nonprofit Account
- How To Set Up A Nonprofit PayPal Account
- How To Use Your PayPal Nonprofit Account To Maximize Donations
- Alternatives To PayPal For Nonprofit Organizations
- Should You Get A PayPal Nonprofit Account?
- FAQs: PayPal For Nonprofits
Why Use PayPal For Nonprofits?
The main benefit PayPal offers registered nonprofits is discounted processing rates for donations. Once PayPal verifies your organization’s 501(c)(3) status and confirms your nonprofit PayPal account, you’ll qualify for a special donation processing rate. Read our guide to registering your organization as a 501(c)(3) nonprofit if you’d like some assistance with this process.
Beyond the discounted PayPal processing rate, keep in mind that PayPal’s universally recognized and widely trusted brand can be a reassuring factor to donors when they consider the trustworthiness of your organization and the security of their transactions.
PayPal gives nonprofit organizations many other reasons to use its services to raise money. Let’s now go through these other advantages:
- Setting up PayPal nonprofit donation buttons to accept online payments is a swift and easy process.
- Accepting donations online — whether one-time or recurring — is incredibly easy once you have your Donate button set up.
- PayPal’s donation buttons are mobile-friendly, making it easy to accept donations from mobile internet users.
- Want to accept donations in person? Maybe even sell nonprofit-related merchandise in person? PayPal facilitates this as well.
- Sell branded products and fundraiser merchandise online on your website using a customizable cart.
- Integrate your PayPal nonprofit account with countless third-party apps to facilitate charity events, such as auctions, fundraising galas, annual retreats, trivia tournaments, etc. — the options are endless!
PayPal’s universal brand recognition and charity-friendly fundraising features make it a solid processing choice for most nonprofits. However, PayPal is far from a perfect processor.
Disadvantages Of Using PayPal For Nonprofits
One major factor you’ll have to keep in mind is that PayPal is a third-party processor (also known as a Payment Service Provider or PSP).
With third-party processors, the signup and approval process is quicker and easier than that of a traditional merchant account provider. However, individual transactions are more heavily scrutinized when processed by a PSP, which increases the risk that an innocent transaction might trigger an account hold.
Read our article on how to avoid merchant account holds, freezes, and terminations to learn how to minimize the risk of this happening.
Let’s go through some of the other downsides of using a PayPal nonprofit account:
- While PayPal offers discounted processing rates for nonprofit donations, some competing donation platforms let you give donors the option of covering the transaction fees themselves, which can result in your organization paying no transaction fees on most donations. PayPal doesn’t offer this feature.
- PayPal’s discounted charity rate still includes a fixed per-transaction fee is $0.49, which is relatively high. Most charities receive donations that are, on average, large enough to make this a non-issue. However, if your nonprofit does receive lots of very small donations, PayPal’s fee structure is poorly suited to your needs.
- Some of the PayPal tools you may want to use in the course of fundraising — donation pages, donor management, etc. — are either inadequate or don’t exist. Luckily, there are legions of third-party integrations that can fill in any gaps left by PayPal’s fundraising tools.
If you’re curious about your other options, read our article on discounted payment processing options for nonprofits for information on other merchant service providers that cater to nonprofits.
Fees & Rates For A PayPal Nonprofit Account
PayPal’s standard processing fee for donations is 2.89% + $0.49 per transaction. However, registered 501(c)(3) charities are eligible to pay just 1.99% + $0.49 per transaction. However, payments from non-US credit cards are subject to an additional 1.5% transaction fee.
One thing you can do with PayPal’s donation buttons is to solicit recurring donations. Donors can select the monthly check box to give automatic monthly payments. These payments will process at the same rate as your one-time donations.
Note that PayPal nonprofit rates do not apply when you accept in-person donations via the PayPal Zettle mPOS app, which charges a 2.29% + $0.09 per transaction fee for all card-present transactions. You’ll also be able to process donations via QR code at this rate. We’ll have more to say about Zettle later.
PayPal also lets you accept contactless payments via Apple Pay. Though the PayPal nonprofit discount won’t apply, you can receive donations via Apple Pay at 2.59% + $0.49 per transaction, which is lower than PayPal’s standard donation rate (though not the nonprofit rate).
You might assume that since Venmo is owned by PayPal, it has the same nonprofit features as PayPal itself. However, know that Venmo offers its own advantages (and disadvantages) in terms of charity fundraising. For example, Venmo’s processing rate for registered nonprofits — 1.9% + $0.10 — is lower than that of PayPal itself. However, unlike PayPal, Venmo doesn’t support recurring donations. Read our Venmo for nonprofits guide to learn more.
One additional note: PayPal has a Micropayments plan for those that typically process payments of less than $10. Under this plan, you pay 4.99% + $0.09 per online transaction instead of PayPal’s regular processing rate. When small payments are processed, the higher percentage rate is more than made up for by the lower fixed fee. Sadly, not all PayPal users can sign up for the Micropayments plan. It may be that donations are not currently eligible for Micropayments pricing (though PayPal has no stated policy to this effect). However, if your organization processes lots of small amounts from donors, it can’t hurt to ask PayPal if you’d be eligible for Micropayments pricing.
Read our article on PayPal pricing for the full story on PayPal’s fee structure, which has become significantly more complex over the last few years.
How To Set Up A Nonprofit PayPal Account
If you’re wondering how to set up PayPal for a nonprofit organization, here’s what you need to do.
- Sign up for a PayPal business account (read our guide to creating a PayPal business account for more details)
- Select Nonprofit Organization as your business type
- Select Nonprofit as the category
- Enter your organization’s information to link it to your PayPal account and transfer funds to your bank account
You’ll need the following information handy during the registration process:
- Registered name
- Registered address
- Phone number
- Email address
- Website URL
- Date established
Organization Bank Account Information
- Account number
- Routing number
- Online banking access
Account Holder Details
- Job title
- Date of birth
- Social security number
- Home address
- Email address
As for PayPal nonprofit requirements, you’ll need to provide the following to confirm your organization’s 501(c)(3) status and be eligible for the charity rate:
- Estimated volume of monthly PayPal transactions
- PDF of your bank statement attached to your PayPal account (including full account name and number)
If your nonprofit organization does not yet have 501(c)(3) status (read Merchant Maverick’s guide to nonprofits to learn how to achieve 501(c)(3) status), you’ll have to pay the standard per-transaction donation fee.
Lastly, large organizations that process more than $100,000/month will need to call PayPal to make special arrangements.
How To Use Your PayPal Nonprofit Account To Maximize Donations
Let’s examine the various ways PayPal can be a boon to your nonprofit fundraising.
Alternatives To PayPal For Nonprofit Organizations
Let’s look at the primary alternatives to using a PayPal account for nonprofit organizations. Here are some examples of online fundraising platforms:
- Fundly: Fundly is an online crowdfunding site with particular appeal for nonprofits as a PayPal alternative, as your fundraising page is completely customizable. You’ll have easy social sharing integrations, intuitive management tools, and the ability to offer perks to donors, depending on their level of support. There’s a 2.9% + $0.30 fee charged to each transaction — thankfully, Fundly recently eliminated its platform fee.
- Donorbox: Donorbox is a solid fundraising option for nonprofits seeking to accept recurring donations, collect donor data, make customizable donation forms, and more. Donorbox integrates with a wide range of website builders, CRM providers, and email marketing tools. Its 1.5% flat fee for donations is one of the lowest in the industry, and you can ask your donors to cover the transaction fee. Custom plans are available for larger organizations.
- Qgiv: Qgiv’s online fundraising platform is another PayPal alternative worth your consideration from a nonprofit standpoint. Qgiv’s donation forms are fully customizable (much more so than PayPal’s donation forms) and mobile-responsive. The platform allows for recurring gifts to encourage donors. Qgiv even provides an auction platform and event management capabilities from its app. Qgiv’s pricing and fees both vary depending on the level of service you need — just know that there will be a monthly fee.
- GoFundMe: While GoFundMe is known as a personal crowdfunding platform, it also supports nonprofit fundraising. With GoFundMe, you can launch an unlimited number of campaigns, access basic donor data, and set up team fundraising pages, all without paying a monthly fee or a platform fee (just a 2.9% + $0.30 processing fee). Alternatively, you can use the GoFundMe Charity’s CrowdRise software, which offers more extensive donor data, ticketing and registration features, deductible email receipts, and more. Read our GoFundMe review to learn more.
Our article, 7 Platforms That Support Crowdfunding For Nonprofits, details some of your other nonprofit crowdfunding options.
When it comes to using third-party processors to process your donations, PayPal isn’t the only game in town. Let’s explore the other big third-party processor offering nonprofit-specific benefits:
- Square: Square has a lot to offer nonprofits as a payment processor. While Square doesn’t offer discounted processing for nonprofits, its 2.6% + $0.10 per transaction rate for swiped, dipped, and tapped payments through the Square point of sale app is extremely competitive (Square’s online processing fee is 2.9% + $0.30). Capturing donor info is easily done right from the transaction screen of the Square POS app, automatically adding your donors to your Customer Directory. This is only the tip of the iceberg when it comes to Square’s nonprofit-friendly tools. Read our Square review for the full scoop, and check out our Square vs. PayPal piece for a direct comparison of the two.
- Stripe: Stripe is another PSP with plenty to offer nonprofit organizations seeking to take donations online. With a discounted nonprofit rate of 2.2% + $0.30 for most donations (donations made with Amex cards may process at a higher rate), custom donation forms, the option to offer a prefab hosted payment page, and a vast integration library, Stripe is worth investigating from a nonprofit standpoint. Check out our Stripe review for a full rundown and our Stripe for nonprofits article for a deeper look at the processor’s nonprofit features.
- Shopify: eCommerce giant Shopify offers a number of features nonprofits will like, including discounted processing, recurring donations, event ticket sales, email marketing, in-person donations, and more. Read our Shopify review for the full story on this massive platform, then check out our Shopify for nonprofits piece for details specific to nonprofit fundraising.
Now, what if you’d rather use a traditional merchant account than a PSP? While merchant accounts don’t normally come with as many add-on software options as a payment services provider, their laser-focus on payment processing means that you’re much less likely to experience an account hold or termination than with PayPal (or Square/Stripe/Shopify, for that matter). Here’s one example:
- Dharma Merchant Services: This merchant account provider is quite well-suited to nonprofits that take in more than $10,000 per month. Dharma features transparent interchange-plus pricing, which should see you saving money over the likes of PayPal. And, unlike some other merchant account providers, Dharma doesn’t charge account setup fees, annual fees, or early termination fees, nor are there any monthly minimums. Dharma also provides more comprehensive customer support than does PayPal. Read our full review of Dharma Merchant Services to get the complete scoop.
Dharma Merchant Services
Have a look at our nonprofit payment processing comparison piece for an even more comprehensive look at nonprofit-friendly processor options.
Should You Get A PayPal Nonprofit Account?
PayPal may not be the right payment processing solution for every nonprofit. However, when it comes to accepting online donations, PayPal may well be the simplest tool out there.
With support for in-person payments, invoicing, reporting, nonprofit-specific discounts, and a massive list of integrations that fills any functionality gaps left by PayPal’s in-house solutions, PayPal for nonprofits makes a lot of sense. Alternatively, PayPal makes for a solid supplementary payment option if you primarily accept donations via other means.
Our nonprofit hub is a great place from which to discover all our nonprofit-related resources. If you’re looking to take your nonprofit’s organizational capabilities to the next level, be sure to check it out!