PayPal For Nonprofits Guide

Nonprofits may think of PayPal as mainly an eCommerce platform and digital wallet, but PayPal has much more to offer nonprofit organizations than just a Donate button.

In this guide to using a PayPal nonprofit account, we’re highlighting all aspects of PayPal for nonprofits — features, policies, and integrations — that can facilitate fundraising, bookkeeping, and other nonprofit needs. We’ll also detail PayPal nonprofit fees and discuss the main alternatives to using PayPal for nonprofit fundraising.

Why Use A PayPal Nonprofit Account?

Among the many benefits of PayPal for 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.

If you’re wondering how to register your organization as a 501(c)(3) nonprofit, our resources can help you with this process.

Beyond the discounted PayPal processing rate, PayPal’s universally recognized and widely trusted brand can be reassuring to donors when they consider the trustworthiness of your organization and the security of their donations.

PayPal gives nonprofit organizations many other reasons to use its services to raise money.

Advantages Of Using A PayPal Nonprofit Account

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 A PayPal Nonprofit Account

One major factor to remember 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.

If you go with PayPal, you’ll want to understand the steps you can take to minimize the risk of merchant account holds, freezes, and terminations.

Let’s go through some of the other downsides of using a PayPal nonprofit account:

If you don’t think PayPal will meet the needs of your charity, there are several other discounted payment processing options for nonprofits to consider. You might also want to compare the features and pricing of the best credit card processing providers more generally.

PayPal Nonprofit Fees

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.

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).

The subject of PayPal pricing has become significantly more complex over the last few years. Luckily, we can help you make sense of PayPal’s fee structure.

How To Set Up A PayPal Nonprofit 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
• 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

If your nonprofit organization does not yet have 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.

Accept Online Donations Via PayPal

Adding a PayPal Donate button to your organization’s website and/or fundraising emails is quick and easy. To set up your Donate button, you’ll need to follow the steps outlined on PayPal’s developer page. You’ll be able to choose your button style, select the currency in which you receive donations, choose whether to let donors make recurring monthly donations, and more.

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.

Use PayPal To Accept Donations In Person

Nonprofits can accept in-person donations via the PayPal Zettle mobile POS system. With PayPal Zettle, you get a modern chip + contactless + PIN card reader ($29 for the first reader, $79 for all subsequent readers). You’ll then be able to process in-person donations at big fundraising events, charity galas, etc.

Transactions processed by Zettle are subject to a 2.29% + $0.09 fee. Unfortunately, nonprofits cannot pay a discounted processing fee when using Zettle. Keyed-in transactions will be subject to a higher 3.49% + $0.09 fee.

You can also send out invoices via the PayPal Zettle app. Invoices are free to send, but when you get paid, you’ll be paying the 3.49% + $0.49 rate that PayPal charges for standard non-donation online transactions. What’s nice about the ability to send invoices is that for large donations (four figures or more), you can just send an invoice, thereby creating a paper trail. That can come in handy later!

Sell Merchandise With PayPal's Mobile POS

Whether your nonprofit organization is running a charity auction or is selling branded merchandise at a gift shop or other “meet space” location, PayPal Zettle is a solid mobile processing option. Furthermore, if you need a POS system with more feature depth than Zettle, PayPal integrates with more robust POS systems as well.

The 2.29% + $0.09 PayPal rate for in-person transactions applies regardless of your POS partner, but you will incur additional software fees for the POS system itself.

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Track Your PayPal Donations And Improve Your Bookkeeping

PayPal’s reporting tools give you detailed information about your account activity and can assist your nonprofit with bookkeeping. Additionally, if your nonprofit processes $20,000 in gross payment volume from sales of goods or services in a single year and processes 200 payments for goods or services in the same year, PayPal will send Form 1099-K to both you and the IRS for that year early in the following year.

Furthermore, PayPal integrates with QuickBooks via the Connect to PayPal data integration app, available from your QuickBooks account.

Alternatives To PayPal For Nonprofit Organizations

There are several alternatives to using a nonprofit PayPal account, both in terms of payment processors and dedicated online fundraising platforms. Let’s start by exploring some other payment processors offering nonprofit benefits.

Nonprofit Payment Processing Alternatives To PayPal

If you’d rather use an all-in-one donation platform for your nonprofit’s operations, know that these platforms tend to come with higher monthly fees than do standalone processors. However, they also offer more built-in fundraising tools.

The Bottom Line: Should You Get A PayPal Nonprofit Account?

PayPal won’t prove to be the ideal payment processor for every nonprofit. However, when it comes to accepting online donations, PayPal just might be the simplest tool out there.

With support for in-person payments, invoicing, reporting, nonprofit-specific discounts, and a massive list of integrations that fill any functionality gaps left by PayPal’s in-house solutions, PayPal for nonprofits makes considerable sense.

PayPal also 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, check it out!