One of the easiest ways to transfer money online is through a digital site like PayPal. No actual cash needs to exchange hands in order to complete a donation. A credit card donation, balance donation, or direct ACH funding through a checking account can all complete this transaction. As with any form of monetary transaction, there are certain advantages and disadvantages which must be considered before instituting this type of donation policy. Here are the key points to consider with the pros and cons of PayPal donations.
The Pros of Using PayPal Donations
1. Donation buttons can be added to any website.
It requires no knowledge of coding to setup a donation button on a website. All someone has to do is log into their PayPal account, copy the desired button script, and then paste it into their website where they want to have the button listed. This will link the site to the PayPal account for any purchases and generate a button that has the preferred solicitation text on it.
2. People don’t need to have a PayPal account to donate.
Users can just click on the donation button and be taken to a screen where they can make a direct payment. There is no need to sign up for a PayPal account to make this happen. The debit or credit card information just needs to be inputted like any other secure online transaction and then the recipient receives the designated funds. It is a fast, simple process.
3. The money donated can be easily transferred to a local checking account.
Assuming the user who is receiving donations has linked their PayPal account to their checking account, any funds received can be transferred to that checking account. The process does take 3-5 business days in some circumstances and the initial verification process can be lengthy, but once completed it becomes possible to put PayPal funds into virtually any account.
4. You can access the cash through a PayPal debit card.
PayPal also issues debit cards that can access an account balance immediately. Although there are fees associated with certain actions, such as an ATM withdrawal fee, users also receive 1% cash back on all purchases made on the account as well. For a nonprofit organization, that means the donated cash can have a little more value to it.
The Cons of Using PayPal Donations
1. The confirmation of a donation comes by email.
If you’re receiving PayPal donations that are tax deductible, then the confirmation or receipt for the donation typically comes to users via email. This means the receipt could be automatically filed into the spam folder and never seen. The same is true for your end of year donation statements that may be required. This would make it more difficult to claim the donation on personal taxes.
2. Not everyone is comfortable in making an electronic donation.
Donating by PayPal is easy to do, but not everyone is comfortable with the process. People like to see their dollars at work within your programs and that can be difficult to do when making this type of donation. Having an email subscription form for updates can help to counter this issue a little bit, but it won’t eliminate the joy that some people want with a direct in-person donation.
3. There are costs for every transaction made that must be paid.
If someone makes a donation through PayPal, then you aren’t going to see the entire donation. The transaction fee for donations is low at 2.2%, but there is also a $0.30 per transaction fee that must be paid. In real numbers, this means you’re going to be losing $2.50 out of every $100 that is donated to your good cause. Special rates are available for donations above $100,000.
4. You must have a verified non-profit status.
If you don’t have a non-profit status, then you can still raise money, but your fees are going to be higher. PayPal will not lower your donation button rates until they have confirmed your tax exempt status at all levels of government. If you raise money before this confirmation occurs, then there are no refunds on the higher fee amounts even with the approval. That’s why many businesses choose to wait for confirmation before raising money.
The pros and cons of PayPal donations show that it can be a useful tool for raising money. As long as the potential negatives are evaluated and fully understood before beginning, then this easy to use method of fundraising could be a viable solution to meet the needs of your non-profit organization today.