Nonprofit organizations have never had as many tools at their disposal for raising money as they do today. With all the options out there, you might not think of PayPal as a natural fit for your nonprofit organization, given PayPal’s close association with eCommerce and business enterprises such as eBay. Alternatively, while you might be aware that PayPal offers a Donate button, you may not know about the other PayPal features, policies, and third-party integrations that can facilitate nonprofit fundraising.
With this article, we’ve set out to highlight all aspects of PayPal that can benefit your nonprofit organization — and as it turns out, this encompasses quite a bit! We’ll also detail the main alternatives to using PayPal for nonprofit fundraising.
Why Use PayPal For Nonprofits?
PayPal presents nonprofit organizations with plenty of reasons to use its services to raise money.
- Setting up a donation button 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.
- Nonprofits can get a discounted payment processing fee applied to their online PayPal donations.
- Want to accept donations offline or in-person? Maybe even sell nonprofit-related merchandise in-person? PayPal facilitates this as well.
- Sell branded products online on your website using a customizable cart.
- Integrate with countless third-party apps to facilitate charity events, such as auctions, fundraising galas, annual retreats, trivia tournaments — the options are endless!
Disadvantages To Using PayPal For Nonprofits
Of course, PayPal is an imperfect processor — both for nonprofits and everyone else.
Keep in mind that PayPal is a third-party processor (also known as a Payment Service Provider (PSP) or an aggregator). As such, PayPal carries with it an inherent risk of account instability. As opposed to a traditional merchant account wherein each organization or merchant has a separate account, third-party processors combine all their merchants and nonprofits as sub-users under a single umbrella merchant account.
This arrangement means that the sign-up and approval process is nearly instantaneous. It also means that because merchants (and nonprofits) are not vetted before signing up, every transaction gets scrutinized much more heavily than transactions processed by a traditional merchant account provider. This process increases the risk that a completely innocent transaction might trigger an account hold.
You’ll want to review PayPalâs prohibited products and services to make sure youâre in the clear. (Most nonprofits should be perfectly fine, but we make no guarantees, and it’s always important to understand what you are signing up for.) You should also check out our article, How to Avoid Merchant Account Holds, Freezes, and Terminations, to learn how you can minimize the chance of this kind of disruption.
Additionally, some of the PayPal tools you may want to make use of in the course of fundraising 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.
PayPal Fees For Nonprofits
One nice perk of using PayPal to accept online donations as a nonprofit is that you can pay a discounted payment processing fee when accepting online payments.
PayPal’s standard processing fee is 2.9% + $0.30 per transaction. However, registered 501(c)(3) charities are eligible to pay just 2.2% + $0.30 per transaction. To do this, you’ll need to do the following:
- Verify your 501(c)(3) status by entering your EIN or providing official documentation
- Provide a copy of a bank statement or a voided check for each bank account linked to your PayPal account
If your nonprofit organization does not yet have 501(c)(3) status, you’ll have to pay the standard per-transaction processing fee.
Note that nonprofits do not pay a special discounted rate when accepting in-person donations via the PayPal Here mPOS app, which charges a 2.7% fee for all swiped transactions. More on PayPal Here later.
What’s more, if your organization typically processes payments of less than $10, you may want to sign up for PayPal’s micropayments plan. Under this plan, you will pay 5% + $0.05 per online transaction instead of PayPal’s regular processing rate, which saves you money on each transaction if you primarily process low-value transactions from donors.
Make The Most Out Of Your PayPal Account With These Nonprofit-Friendly Features
Let’s go through all the ways PayPal can be a boon to your nonprofit fundraising.
Accept Donations Online
Adding a Donate button to your organization’s website and/or fundraising emails is quick and easy. To get the process started, here’s what you do:
- Sign up for a PayPal business account
- Select Nonprofit Organization as your business type
- Select Nonprofit as the category
- Enter your organizationâs bank account information to link it to your PayPal account and transfer funds to your bank account
Note that 501(c)(3) organizations still have to follow the process outlined in the previous section to receive donations at the discounted rate.
To set up your Donate button, you’ll need to follow the steps outlined here on PayPal’s developer page. You’ll be able to do the following:
- Choose your button style
- Display your organization’s name and logo
- Select the currency in which you receive donations
- Choose whether donors can give any amount, an exact amount, or provide three set amounts
- Choose whether to let donors make recurring monthly donations
- Choose whether to collect donor mailing addresses
- Choose whether to let donors send you optional notes with their donations
- Add additional HTML button variables
Another way to solicit online donations is to use PayPal.Me — PayPal’s peer-to-peer payment platform — to send personalized donation links to your donors. It’s a great way to approach your biggest supporters to ask for individual gifts.
One other thing: If you process more than $100,000 in monthly volume, you’ll need to call PayPal to make special arrangements.
Accept Donations In-Person
Nonprofit organizations can accept in-person payments via the PayPal Here mobile POS system. PayPal Here is not as fully-featured as a full POS, but for a mobile system, it certainly gets the job done.
With PayPal Here, you get your choice of three different mobile card readers, two of which are free until June 30th, 2020. With a mobile card reader, you can process in-person donations at big fundraising events, charity galas, trivia tournaments, or wherever else your organization’s fundraising takes you. Do note that the basic mobile headphone-jack card reader is only suitable for organizations processing less than $500 a month.
All swiped transactions processed by PayPal Here are subject to a flat 2.7% fee. Unfortunately, nonprofits cannot pay a discounted processing fee when using PayPal Here. Keyed-in transactions will be subject to a higher 3.5% + $0.15 fee.
Additionally, you can send out invoices via the app. Invoices are free to send, but when you get paid, you’ll be paying the standard 2.9% + $0.30 rate that PayPal charges for standard online transactions. What’s nice about the ability to send invoices is the fact that for substantial purchases — we’re talking four figures or more — you can just send an invoice, thereby creating a paper trail. That can come in handy later!
Additionally, payments from non-US credit cards are subject to an additional 1.5% transaction fee.
Other PayPal Here features include:
- Cash and check recording (yes, you can accept cash and checks with PayPal Here)
- Quick sale mode
- Item library
- Item add-ons
- Item categories
- Custom tax
- Custom tip options
- Refunds and partial refunds
- Recurring billing
- Sub-user accounts
- Support for register setup
- Same-day funding
Whether your nonprofit organization is conducting a charity auction (if this is the case, here are some auction apps that integrate with PayPal) or is selling branded merchandise at a gift shop or other “meet space” location, PayPal Here is a solid option for processing your transactions. And if you need a POS system with more feature depth than that provided by PayPal Here, don’t worry, as PayPal integrates with more robust POS systems as well, including:
The 2.7% PayPal rate for swiped transactions will apply regardless of your POS partner, but you will incur additional software fees for the POS system itself.