PayPal Donations and Fees

Recently I wrote about losing a friend of ours. Leaving behind such a young family and naturally having concerns for the initial financial issues that his family would potentially face, we had a collection on a forum for them. I arranged this using my personal PayPal account, and posted up a donation link for donations to be made.

Now I have two PayPal accounts (don’t worry, it’s allowed!). I have a business PayPal account which accepts credit/debit card payments, and all income received is charged a fee unless it comes from a payee who’s paid to waive the fee (usually from somewhere like Text Link Ads that do bulk payments). I also have a personal PayPal account to accept donations off my site towards the use/upkeep of plugins, help given to people etc. and also it means that I can easily test PayPal scripts such as an IPN, on client sites. I use my personal account to make a payment to my business account. It avoids the potential of never getting a refund from the client (yes this has happened before!). In fact it’s what PayPal advises.

So, I have a personal PayPal account. Now when I got this account my understanding at the time was that any payments received to it would be fee free, so if I lent money to a friend they could send it to my personal account and no fee would be charged. This was correct and still is (providing the payment is sent as a personal payment). I was also of the belief that credit and debit card payments could not be accepted by a personal account, this has actually been changed and up to 5 card payments a year can be received, of course with card processing charges.

Therefore, with this knowledge, I originally set up a donation link on my own site (it’s on the right near the bottom of the sidebar!) and on all the donations I’ve received through it, I’ve never been charged a fee, after all it’s a personal account accepting a PayPal payment, therefore I refer to my first point above whereby payments received are fee free.

Fast forward to last month when I set up a donation link for people to donate to the memorial fund. After a number of payments were made I happened to log in and looked at the details of one. You see the new PayPal overview page doesn’t show you if fees have been deducted off a payment and how much, it just shows you the original payment amount, so I hadn’t twigged at that point about what I was going to find out. Viewing the details of a payment made through a PayPal account I saw a fee had been deducted. Until then I’d figured that the total in the account (which was virtually empty otherwise) was just an odd figure as I’d had a few people donate using a credit card, which of course had fees due to card processing (which I completely understand).

So despite my account being a personal account, and the payee using their PayPal account to pay, a fee had still been taken. Yet if the same person had just gone into PayPal and sent a payment to the email address set up for donations, it would have been fee free! Naturally I was a bit confused at this and so emailed PayPal for clarification. I simply asked (version without the waffle)

I currently have a personal account, and have recently been accepting donations, due to the death of a close friend, to go to his family.

On checking my account today I can see that every donation, regardless of whether it was made via a paypal account or card, has been charged a fee. Is this correct? Surely donations should not be getting charged a fee?

My first response was a text book copy and paste job that simply explained about commercial and personal payments. This, in part, was probably because the person responding couldn’t type considering the initial part was half finished as if something had been deleted. Not to mention, the response did not include the word “donation” anywhere!

So I responded:

Thank you for your email, however this doesn’t tell me where a donation payment comes under. A donation is not a commercial payment, yet I have been charged fees on donations made from other users’ paypal accounts.

Please could you clarify why the personal donations (not the credit card funded ones but the paypal funded ones) have been charged a fee.

PayPal’s response:

The reason why you have been charged is because you still have a ‘Personal’ PayPal account, also you would still need to set up your PayPal account as a charitable institution in order to recognise your organisation as a charity.

I must admit, at the time of receiving this I wasn’t in the mood for laughing, but now you can’t do anything but laugh at this. All I’ve asked is a simple question and suddenly I’m being told how to become a charity on PayPal! The email proceeded to go on about the documents they would require to prove I was a charity. I never said I was charity! My response pretty much sums up my frustration at this point:

I am not a charity, I’ve never said I am a charity and I’m not about to change my personal account, for my own personal payments, to a charity account.

I also stated my question quite clearly yet again:

On receiving personal donations, why have they been charged a fee?

Third time lucky maybe? I also received a customer satisfaction link at this point, where I wrote quite a long essay on the lack of support when their staff clearly couldn’t read a simple question and reply to it!

So I got another reply from PayPal

I understand that you’re asking of there is a way to flag the receiving fee when accepting a donation.

No not really! It would be nice if they could but I never asked that. So I decided on my final response as it was the evening after the funeral, I was shattered from driving across country and just beyond fed up at this point:

No I didn’t ask if there was a way to flag the receiving fee when accepting a donation. I asked why receiving personal donations were charged a fee when receiving personal payments are not charged, as there’s no difference in my opinion besides the way in which the money is sent. It still goes from account A to account B and it’s a personal transaction.

Of course they responded, and to be fair, the final person tried their best. They still didn’t fully explain why they charge a fee on a donation but not a personal payment, it’s no different in my eyes, but they simply said that a donation is treated as goods or service. One point that did stick out was:

I strongly do not encourage you to use that option to receive money for your donation regardless any reason as it if the system finds any slight unusual transaction in your account, the system might have the account locked permanently.

Right, so in other words, don’t use donation links?! Well after this experience I won’t be anyway. I’ll be changing my donation links to be standard payment links and just set it so that the user can specify how much. It’s clearly a ridiculous system with PayPal especially if this is their advice.

So there you have it. If you want to receive donations for yourself for help and work you give for free, or donations towards a cause of any sort, don’t use a donation link!

(Please note, I appreciate the PayPal Personal account is free and PayPal doesn’t owe me anything. The point of this is not to moan about PayPal charging fees, as I know they do, naturally I wish they hadn’t, but it is about the lack of explanation as to why they charge a fee on what is essentially a personal payment. Pay one way, it’s free, pay another, it costs around 4-5%).

19 Responses

  1. Andy M says:

    Hello. I too am trying to set up my website so it can accept donations. So far on a couple of test runs each transaction has been charged a fee. Did you find a way around it? Do you NOT use the “Donation” link from PayPal? If you have found a way around the fees and it is still pretty easy for people to donate, please let me know. It would be greatly appreciated. I may even acknowledge that you and your website helped me with this problem.
    Thank You.

    • Sarah says:

      Hi Andy, the only way I found was to ask people to log into their paypal account and send a personal payment to the donation email address. Every other way now seems to charge a fee. It’s ridiculous I know 🙁

  2. Andy M says:

    So right now if I were to click on your Donation link and donate $1 or pound, you would get the entire amount? Your donation page looks exactly like mine. I’ve tested this by having someone log into their account through the donation page and for their $1 donation only $0.67 went into my account. I mean I could state that people need to go to PayPal and log in and then send money to a specific email address. That’s just alot of steps to go through if someone wants to donate. I’m going to keep looking around online for services that allow you to accept donations either for free or for a monthly/yearly fee. My plans are just not going to work if a person donates a dollar and expects a dollar to go to the cause when only $0.67 is going to it. I’ll let you know if I find anything.

  3. Sarah says:

    Hi Andy, in answer to your question, if you clicked on my donate link and donated anything, I’d get charged a fee. That is the method that is charged fees and what my rant above is about.

    Whereas if you log into paypal and send me the same amount through your account, I wouldn’t be charged a fee.

    Simply put, the only way to not lose fees on a donation is to make it within paypal through your account, which is stupid.

    I’ll be removing the donation link off my site when I get my new design up, as I’d rather not line PayPal’s pockets with simple donations.

  4. Nicole Price says:

    I have not had to use my paypal account so far for any donation and your experience and what you have had to go through has given me the heebie jeebies. I shall indeed be very careful if I ever have to set up a collection. Thank you.

  5. Tom says:

    Thanks Nicola, that’s a really interesting article. Shame you had to go through so much crap to learn the ins and outs!

  6. Tom says:

    Whoops! I mean Sarah – duh!

  7. Wiktor says:

    Hallo Sarah,

    Nice article. I have similar problem however I found out the charities are charged discount fee of around 1,5 %

    I tried to go around it but it seems if you want to be legal you just have to accept it 🙁


  8. Nicole Price says:

    I came back to check if any thing new has been commented and find the two comments by Tom to be quite amusing! Duh indeed!

  9. oyunlar says:

    Whoops! I mean Sarah – duh!

  10. Vlad Alexa says:

    just in case anyone needs to know how to actually change a url from donation to standard transfer is to change “cgi-bin/webscr?cmd=_donations” to “cgi-bin/webscr?cmd=_xclick”

  11. Joshua McGee says:

    No not really!

    This is my perpetual experience with customer service reps. I have an idea that only “Level 3” or whatever service technicians are allowed to do anything other than cut-and-paste, and if there’s a question that’s not on their canned responses, SOL.

    Please note, I appreciate the PayPal Personal account is free and PayPal doesn’t owe me anything.

    Sure they do. All the time the money stays in their system rather than some retailer’s pocket or a bank account (deposits to the latter of which they artificially delay), they’re earning interest. Shuffling the bytes to say whether it’s in your account or another’s costs essentially nothing once the infrastructure is in place. So, you have a business relationship.

    just in case anyone needs to know how to actually change a url from donation to standard transfer is to change “cgi-bin/webscr?cmd=_donations” to “cgi-bin/webscr?cmd=_xclick”

    Ooh, now that’s a good tidbit to know.

  12. Matt says:

    I just concluded my first fundraiser on my site using paypal. Kelly has joined the race for others team and just started her own fundraiser. I accepted the fees as unavoidable. I’ve found many other sites offering fundraiser pages and online donation services for a fee. The paypal fees are actually comparatively quite low. But I’m curious. Does anyone know if you create a paypal business account and supply proper 501c3 credentials, can you accept donations without any fees?

  13. Matt says:

    Ha, I just found this information. You just get a slightly reduced rate schedule as a 501c3, still not free. Interestingly, this blog post was the second google result and the information I wanted was the third…

  14. nicky says:

    To avoid paypal charging any fees simply ask whoever is making a donation to make a gift payment.

  15. CC says:

    PayPal drives me nuts. Thanks for sharing about your experience.

  16. James Le Cuirot says:

    Hi Sarah. Thanks for clarifying this, it’s really not obvious when looking through PayPal’s site. I think you misunderstood your final reply from them though. When they said “I strongly do not encourage you to use that option”, I think they actually meant personal payments. So you *should* use donate links if you want to comply with the rules. This makes more sense to me, especially given this post I found by a PayPal employee.

  17. ZB says:

    It’s not (just) PayPal, it’s laws about payments and income (taxes, mostly).
    Paypal could be clearer in describing available service options.
    Donation links should be clearly labelled “for donations over $##.##” or “for micro-payments under $#.##” or “for non-charity donations” possibly via right-click.
    Language and currency conversion options should likewise be easily found.

  18. PJ Lehane says:

    Hey Sarah, I’m just wondering did Vlad Alexa’s advice work. That by changing the url that you will not incur a charge by paypal:

    “just in case anyone needs to know how to actually change a url from donation to standard transfer is to change “cgi-bin/webscr?cmd=_donations” to “cgi-bin/webscr?cmd=_xclick”

    I am trying to fundraise for my school and I am looking for the easiest way for people to donate and for my school to receive the full donation and not to be charged anything.