Is PayPal Free for Nonprofits? A Breakdown of Costs

PayPal is a widely used payment processing platform for organizations, offering a convenient way to send and receive funds digitally. Understanding the associated costs for nonprofit organizations is important for effective financial planning. This article clarifies the fee structure for nonprofits utilizing PayPal’s services, detailing how specific rates apply to charitable contributions.

Qualifying for Nonprofit Status with PayPal

Nonprofit organizations seeking reduced processing fees through PayPal must first establish their official nonprofit status with the platform. In the United States, this typically requires the organization to hold a 501(c)(3) designation from the IRS.

To begin, an organization needs to set up or upgrade to a PayPal Business account. During this process, the business type should be selected as “Nonprofit Organization.” Documentation proving the organization’s tax-exempt status, such as an IRS determination letter and Employer Identification Number (EIN), must be provided. PayPal reviews these documents, and the verification process generally takes between two to five business days. Once confirmed, the discounted nonprofit rates are applied to the account. Without this verified status, standard commercial transaction fees will apply to any donations received.

Understanding PayPal’s Transaction Fees for Nonprofits

PayPal offers a discounted transaction fee structure for eligible 501(c)(3) registered charities. For domestic transactions, qualified nonprofits incur a fee of 1.99% plus a fixed fee of $0.49 per transaction. This rate is a reduction from PayPal’s standard business transaction fees, which can be around 2.89% or 2.99% plus $0.49 per transaction for non-qualified accounts.

For donations originating internationally, an additional fee of 1.50% applies on top of the standard nonprofit rate. PayPal does not impose monthly fees for basic account setup or maintenance. An exception to transaction fees is the PayPal Giving Fund. Donations made through the PayPal Giving Fund incur no processing fees, ensuring 100% of the donation reaches the intended charity.

Additional Costs and Considerations

Nonprofits should be aware of other potential costs when using PayPal. Chargeback fees, incurred when a donor disputes a transaction, are one such expense. PayPal charges $20.00 per occurrence for standard chargebacks. Even if the nonprofit successfully disputes the chargeback, this fee is generally not refunded.

Currency conversion fees are another consideration, particularly for organizations receiving international donations. When funds are converted from one currency to another, PayPal may apply a conversion fee, often ranging from 3% to 4.5% of the transaction amount. This is separate from the international transaction percentage. Certain premium services or products, such as PayPal Payments Pro, may carry a monthly charge, which can be around $30.00. In-person donations processed via PayPal Zettle, for instance, incur a fee of 2.29% plus $0.09 per transaction, and the nonprofit discounted rate does not apply to these transactions.

Setting Up and Managing a Nonprofit PayPal Account

Once a nonprofit has obtained verified charity status with PayPal, setting up and managing the account for accepting donations is straightforward. The initial step involves linking the organization’s bank account to the PayPal account to transfer received funds. This allows for seamless movement of donations from the PayPal balance to the organization’s primary checking account, typically without additional charges for transfers.

For online fundraising, nonprofits can create and integrate donation buttons onto their websites. PayPal provides HTML code for these buttons, which can be customized to include the organization’s logo, set predetermined donation amounts, and offer options for recurring contributions. Donors can contribute using major credit cards, debit cards, or their PayPal accounts, even if they do not have a personal PayPal account. Nonprofits can also manage incoming funds and access transaction reports directly through their PayPal account dashboard.