Ask LH: How Can I Minimise PayPal Fees?

Dear Lifehacker, I am the treasurer for a very small association. We want to use PayPal so we can sell raffle tickets, receive donations on our Facebook page and so on. I'm just wondering what would be the best way to set up PayPal to do this? Obviously we want to try to avoid fees wherever possible. Cheers, Fees Freeze

Picture by Sean Gallup/Getty Images

Dear FF,

PayPal's ubiquity makes it the obvious solution in this case, and assuming that your association already has a bank account, it's not difficult to set up. PayPal even has a specific page for charities and non-profit organisations.

What you can't avoid is paying some fees to PayPal. For a small organisation (one receiving less than $5000 a month), you'll pay 30 cents plus 2.4 per cent of the value of each transaction. That pricing means that smaller donations are (relatively speaking) more costly: if someone donates $2, PayPal will get 35 cents; if someone donates $20, PayPal takes 78 cents.

There's no way around these fees; that's the price you'll pay. Given the convenience factor and potential for more donations and sales, it's likely to be worth paying, but that decision obviously is up to the organisation. Good luck!

Cheers Lifehacker

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Comments

    Very interesting topic. Just to give you some further info, you'll need to make sure you have a "Constitution" and the bank account needs to be in the name of the Association. To open a bank account in the name, you'll need a few more documents. I've just had to go through the whole process.

    +1 to Rowan. If you claim to be a non profit org, you will have to prove it to Paypal, especially if you want to accept donations.

    You might want to use Google Checkout as well (in addition to PayPal, not necessarily instead of them) since there are a LOT of people who don't use PayPal.

    I got annoyed at PayPal after it locked out community account out. I switched to paymate instead. Our ticket sales are through them. Still fees but credit card interface is nicer.

    If all your payments via paypal are ~$10 or less the micropayments pricing might help. 5% + $0.05 AUD

    However this is more expensive on higher priced transactions. So be careful before you switch to micropayments. Possibly keeping a second account for micropayments.

    Blake - the micro payments pricing can be configured by service to charge 5 percent only for micro payments, and the lower rate for larger ones, so you automatically pay the minimum.

    FF - I'd encourage you to think about how you might actually be able to raise even more revenue with the multi-channel tools you have with PP. Things like mobile fundraising, QR code silent auctions, etc. The power is in the ease it gives people to pay quickly and easily through many methods.

    Be very careful with Paypal if you're doing charity stuff and you are not licenced to do it... it may seem innocent for you to use the payment service to do local collections etc.. but you might find they will sieze the funds and hold you to ransom till you can provide proof that you are a legal charity etc

    http://www.ato.gov.au/nonprofit/

    I ♥ this country.

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