Why Nonprofits Are Leaving PayPal: 7 Reasons + 8 Real Stories

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Table of contents

• Why nonprofits are leaving PayPal

• Why is PayPal bad for nonprofits?

• Is PayPal safe for nonprofits?

• When PayPal still makes sense

• PayPal vs. Zeffy: a quick look

• 8 Nonprofits that Ditched PayPal for Zeffy

• Still using PayPal? You might be losing more than just money

• FAQs

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For many nonprofits, PayPal is the default. It's familiar. Trusted. "Good enough." But what if that familiarity is costing your mission hundreds — even thousands — every month? These eight organizations all started on PayPal. Then they ran the numbers, saw the impact of donation fees, and made a change. Here's what they gained by switching to Zeffy, the only 100% free fundraising platform built for nonprofits.

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Why nonprofits are leaving PayPal

PayPal processes billions of dollars in transactions every year. For a long time, it was many nonprofits' default answer to "how do we accept donations online?" But that's changing. Across the sector, organizations are actively searching for alternatives — and the reasons go well beyond fees.

The seven frustrations below are the most common drivers pushing nonprofits toward purpose-built platforms. They explain the "why" behind the eight real stories that follow.

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Why is PayPal bad for nonprofits?

PayPal was built for e-commerce and peer-to-peer payments. Charitable fundraising was never the core use case, and that mismatch shows up in nearly every layer of the product: how it handles campaign donation spikes, how it routes gifts through intermediary entities, how it supports (or doesn't support) donor relationships, and how it responds when something goes wrong. The seven problems below are the most documented and most costly for nonprofits of any size.

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Transaction fees that compound quickly

PayPal charges nonprofits a discounted rate of 1.99% + $0.49 per transaction through its charitable giving program. That sounds manageable until you do the math. On a $50 donation, you lose $1.49 — nearly 3% of the gift. And that's assuming every donor qualifies for the discounted rate. Standard business account rates run 3.49% + $0.49, which many nonprofits unknowingly end up paying.

Fees are a top reason nonprofits leave — but they're rarely the only one. For the full fee breakdown and a free PayPal fee calculator, see How much does PayPal charge nonprofits?

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Can PayPal freeze a nonprofit account?

Yes — and this is the issue that generates the most alarming stories in nonprofit communities. PayPal's fraud detection algorithms flag unusual activity — and fundraising campaigns, by nature, produce exactly that: a spike in small donations from many new donors in a short window.

The result is accounts frozen without warning, funds held for up to 180 days, and zero clarity on when or whether the money will be released. Reddit forums and nonprofit Facebook groups are filled with organizations describing the moment they discovered their campaign funds were locked — often mid-campaign, during a giving season, or right before a critical program deadline.

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The PayPal 180-day hold problem

The core problem is structural. PayPal's risk models were built for e-commerce and peer-to-peer payments, not charitable fundraising. A successful Giving Tuesday campaign looks almost identical to a fraud pattern from PayPal's perspective. Organizations have no dedicated escalation path and no way to proactively flag their account as a fundraising nonprofit before a campaign launches.

For small nonprofits without cash reserves, a 180-day hold isn't just an inconvenience. It can mean missing payroll, canceling programs, or defaulting on vendor contracts. The PayPal 180-day hold problem is documented extensively in nonprofit communities, and it's one of the clearest signs that PayPal was never designed with charitable organizations in mind.

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PayPal Giving Fund problems

PayPal Giving Fund (PPGF) is a separate 501(c)(3) that acts as an intermediary between donors and nonprofits. When a donor gives through PPGF — including through Facebook fundraisers powered by PayPal — the donation technically goes to PayPal Giving Fund first. PayPal Giving Fund then decides when and whether to disburse it to the intended nonprofit.

Disbursements can be delayed by months. If a nonprofit hasn't enrolled in PPGF or doesn't meet its requirements, donations can be redirected to different organizations entirely — without the donor's knowledge. Donors believe they're supporting a specific cause while their contributions are quietly rerouted.

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PayPal Giving Fund lawsuit

In 2017, a class-action lawsuit was filed against PayPal Giving Fund, alleging that donations were misappropriated and donor intent was routinely undermined. NPR and other outlets have reported on the ongoing transparency problems with PPGF's disbursement practices. Charity compliance researchers have flagged that the intermediary model creates a meaningful gap between donor intent and actual fund delivery.

The deeper issue is that nonprofits have very little recourse when PPGF holds or redirects funds. The organization receiving the donation has no contractual relationship with the donor — PPGF does. That means disputes, delays, and misdirected gifts are largely outside the nonprofit's control.

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No donor communication or relationship tools

PayPal is a payment processor. It was never built for fundraising. There are no built-in tools for donor acknowledgment beyond a basic receipt, no recurring giving management dashboard, no donor profiles, and no way to segment your audience for follow-up campaigns.

Nonprofits that rely on donor retention — which is every sustainable nonprofit — find themselves exporting data and patching together third-party tools just to say thank you effectively. That means paying for an email platform, a CRM, and possibly an event tool on top of PayPal's fees. The total cost of running on PayPal is always higher than the transaction fee line suggests.

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No embeddable donation forms

Want to keep donors on your website during the giving process? PayPal makes that difficult. Standard PayPal donation buttons redirect donors away from your site and onto PayPal's platform. That breaks the experience, introduces friction, and increases abandonment.

Off-site redirects during checkout are widely associated with higher abandonment rates — for nonprofits running campaigns where every donor counts, that friction is a meaningful loss. Todd Childers of Mission Link International specifically cited embeddable forms as a deciding factor when he switched — PayPal's inability to embed a giving form on his organization's website was limiting his fundraising before a donor ever clicked "give."

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Poor nonprofit-specific customer support

When something goes wrong — a frozen account, a misdirected donation, a dispute — nonprofits report facing the same generic support queue as individual sellers and small businesses. There's no dedicated nonprofit support line, no assigned account manager, and resolution timelines that can stretch weeks while program dollars sit inaccessible.

For organizations running time-sensitive campaigns or depending on specific disbursement windows to fund programs, waiting weeks for a resolution isn't acceptable. The lack of nonprofit-specific support is especially painful because the issues nonprofits face — campaign spikes, seasonal donation patterns, Giving Fund disbursement questions — require context that a general-purpose support agent typically doesn't have.

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Missing infrastructure for serious fundraising

Beyond payments, modern nonprofits need tools: event registration, peer-to-peer fundraising, grant tracking, campaign analytics, CRM integrations, and tax receipt automation. PayPal offers none of these.

Organizations that start with PayPal because it's familiar often find themselves building a patchwork of subscriptions to fill the gaps — paying for tools that a purpose-built fundraising platform would include by default. The total cost in money and staff time adds up quickly. As you'll see in the eight stories below, the switch to a purpose-built platform doesn't just save on transaction fees. It recovers hours of administrative work every week.

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Is PayPal safe for nonprofits?

PayPal is a legitimate payment processor with broad consumer trust — but for nonprofits specifically, it carries risks that don't apply to standard e-commerce users. Account freeze risk during campaigns is the most acute: a successful fundraising push can trigger fraud detection and lock funds for up to 180 days. PayPal Giving Fund's intermediary structure introduces a second layer of risk, where donations may be delayed or redirected without the nonprofit's knowledge or control. And when problems arise, there is no dedicated nonprofit support channel with the context to resolve them quickly.

For nonprofits that depend on consistent, timely access to their funds — particularly those running seasonal campaigns, operating without cash reserves, or relying on disbursement windows to fund programs — those risks deserve serious weight before treating PayPal as a default fundraising tool.

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When PayPal still makes sense

Balanced expertise means acknowledging what PayPal does well. For some organizations, it's still a reasonable tool.

If your nonprofit is brand new and processing fewer than a dozen donations per month, PayPal's familiarity and low setup friction can make it a reasonable starting point. It also works for international peer-to-peer payments in situations where dedicated fundraising platforms don't support the recipient country's currency or banking infrastructure. And if a donor specifically wants to give via their existing PayPal balance, accepting that payment method alongside a primary platform is perfectly reasonable.

The problem isn't PayPal existing. The problem is treating it as a fundraising platform when it's a payment processor. Once your organization is running campaigns, managing recurring donors, or processing more than a few thousand dollars per year, the limitations start costing more than the convenience is worth.

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PayPal vs. Zeffy: a quick look

The differences between PayPal and Zeffy come down to one fundamental question: was this tool built for nonprofits? PayPal is a general-purpose payment processor; Zeffy is purpose-built for charitable organizations, with zero fees, embedded forms, donor management, and dedicated support included by default.

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The eight organizations below didn't need a comparison table to make the decision. They needed their account unfrozen, their donors retained, and their program dollars protected. Here's what happened when they switched.

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8 Nonprofits that Ditched PayPal for Zeffy

1. The Dearborn Educational Foundation

• Before Zeffy: Between their golf tournament, Mardi Gras celebration, Green Tie Dinner, and Spring Bazaar — all of which help them support innovative educational practices in Dearborn, Michigan — the Foundation was constantly juggling event logistics. They used PayPal to raise funds for these major events, managing everything from ticket sales to raffle systems.

• The Struggle: The Dearborn Educational Foundation used PayPal to raise millions, but the fees were monstrous. Additionally, since PayPal didn't offer many integrations, the Foundation had to utilize other platforms for tasks such as ticketing and raffles, which added more obstacles and fees for each event.

• Why They Switched: Foundation leader Chastity Townsend turned to Google, hoping someone, somewhere, had designed an actually free fundraising platform. That's when she found Zeffy.

• The Results: Since using Zeffy, the foundation has raised $56,231 and saved $2,812 in fees — money that has gone directly back to supporting students and teachers instead of being absorbed by processing costs.

We are able to give 100% of funds raised back out as well as cut back on administrative duties. Zeffy has helped with using Excel to keep track of registrations for events and allows less data entry into QuickBooks.
— Chastity Townsend, Executive Director

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2. Pan American Medical Association

• Before Zeffy: Pan American Medical Association (PAMA) began fundraising through PayPal and GoFundMe to support their mission of providing medical care and supplies to underserved communities.

• The Struggle: Every dollar in PayPal and GoFundMe fees cut into the number of medical supplies and trainings PAMA could provide to underserved communities. The fees also raised donors' eyebrows — when people see that a high percentage of their contributions is whittled away by fees, those high fees can erode donor trust.

• Why They Switched: The team at PAMA recognized that a single dollar lost meant fewer life-saving medical supplies would reach communities in need.

• The Results: PAMA raised $10,399 through Zeffy and saved $520 in processing fees — funds that went directly toward their recent campaign delivering $10,000 worth of painkillers.

Zeffy's cost-effective platform empowered us to turn limited resources into tangible results, making meaningful strides in addressing healthcare disparities on a global scale.
— Uriel Ramirez, PAMA

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3. True Blue 1881

• Before Zeffy: True Blue — a nonprofit focused on empowering young people to attend college — used a variety of payment platforms, including PayPal, Eventbrite, Network for Good, CashApp, and Venmo for collecting donations.

• The Struggle: Administrative complexity quickly became an issue, as managing donations and event ticketing across multiple platforms required significant time and effort. However, the biggest hurdle was the fees, which reduced the funds available to support students.

• Why They Switched: Founder Tiomb O'Rourke always felt uneasy about asking donors to cover fees on top of their generous gifts. Once they found Zeffy — a completely zero-fee platform for fundraising and event management — they switched.

• The Results: True Blue 1881 raised $48,322 and saved $2,416 in their first year — savings that immediately translated into rent payments, student meals, and tuition assistance. The platform also automated receipts and simplified campaign creation, recovering countless staff hours.

With these savings, we can pay rent, feed students, and cover outstanding balances. Every bit of savings goes straight to supporting our students.
— Tiomb O'Rourke

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4. Autism Meets Faith

• Before Zeffy: The team at Autism Meets Faith — an organization that supports autistic children and their families — used PayPal for fundraising.

• The Struggle: It wasn't just the unexpected fees that caused issues. Payouts from these platforms also took much longer than expected and were costly. Plus, PayPal's inability to embed fundraising forms on their website meant their first Giving Tuesday raised only $3,000.

• Why They Switched: A Google search led them to Zeffy. At first they wondered if it came with a catch; 100% free seemed just too good to be true. But when they learned Zeffy was created specifically to help nonprofits like theirs, they decided to give it a go.

• The Results: Autism Meets Faith raised $39,034 through Zeffy and saved $1,952 in processing fees — money that expanded their programs and deepened their impact for children and families navigating autism.

By eliminating fees, Zeffy has allowed us to maximize every donation and focus on expanding our programs. It's opened new revenue streams and empowered us to make an even bigger impact for the children and families we serve.
— Holly Odogwu, Founder & CEO

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5. Si Se Puede Foundation

• Before Zeffy: The Si Se Puede Foundation had been using PayPal for years to fund their STEM education programs and robotics competitions.

• The Struggle: PayPal fees were costing them $400–500 monthly — money that could have covered their program costs or gone directly to students. The platform's poor interface and tracking also made donor management difficult, while supporters grew frustrated as processing costs diminished their contributions.

• Why They Switched: Foundation leader Faridodin "Fredi" Lajvardi couldn't justify losing hundreds of dollars monthly to fees when those same funds could directly impact students' educational opportunities. After researching alternatives, he found Zeffy's zero-fee approach aligned perfectly with their mission to maximize educational resources.

• The Results: The foundation raised $122,730 through Zeffy and saved $6,136 in processing fees — enough to maintain and expand its robust STEM education programs.

[Zeffy is] easy to use and is very effective. Our organization has greatly benefited from using Zeffy. It makes it more likely for donors to donate because they know how much of their donation actually gets to the organization.
— Faridodin "Fredi" Lajvardi, Si Se Puede Foundation leader

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6. Mission Link International

• Before Zeffy: Mission Link International feeds widows and orphans worldwide, but their fundraising platform was as basic as it gets. PayPal essentially just allowed them to receive donations — nothing more.

• The Struggle: In international relief work, where every dollar feeds hungry people, PayPal's processing costs weren't just administrative expenses — they literally took food out of the mouths of widows and orphans who desperately needed help.

• Why They Switched: Leader Todd Childers researched extensively, evaluating half a dozen platforms that offered contemporary fundraising features beyond simple money transfers. He even considered building custom solutions before finding Zeffy's approach to nonprofit fundraising.

• The Results: Mission Link International raised $53,938 and saved $2,969 in fees — money that went directly toward feeding vulnerable populations instead of processing costs.

Unlike PayPal, Zeffy allows the creation of interactive, detailed forms for numerous campaigns. We can embed them on our website's giving page or as Pop-Up forms.
— Todd Childers, Mission Link International Leader

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7. The Sacred Portion Children's Outreach

• Before Zeffy: Sacred Portion Children's Outreach — a nonprofit that supports the care and adoption of orphaned children — collected monthly sponsorships and adoption fees through PayPal, but the platform was undermining their mission in multiple ways.

• The Struggle: PayPal fees weren't just reducing their budget — they were demoralizing the team. Every processing fee represented money taken away from vulnerable children who needed it most. Plus, the platform was complex and lacking essential fundraising features, while customer support was nearly impossible to reach when problems arose.

• Why They Switched: Leader Brynne Spicer wanted to ensure the full value of their fundraising efforts reached the children they served. She invested valuable time researching fundraising platforms, determined to find a solution that honored both their donors' generosity and their mission to help children. That's when she found Zeffy.

• The Results: Sacred Portion raised an impressive $187,000 through Zeffy and saved $9,350 in processing fees — their largest fee savings of any organization on this list.

No more fees, easier to manage, more features, and we loved that we could send a fun and personalized form to our donors who love to know the story behind what we're doing.
— Brynne Spicer, Sacred Portion Children's Outreach Leader

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8. Hope Always Foundation

• Before Zeffy: Hope Always Foundation, an organization that gives personalized tablets to kids facing long hospital stays, started using PayPal simply because their website host, GoDaddy, suggested it.

• The Struggle: PayPal's high fees and mandatory minimum donation requirements made operations difficult for this small nonprofit.

• Why They Switched: When founder Bobby Kesselman saw a $700 fee, he knew they needed a different approach. For a small nonprofit, losing that much money to processing costs wasn't just inefficient — it was unsustainable.

• The Results: Hope Always Foundation raised $6,950 through Zeffy and saved $347 in fees, proving that even smaller organizations can benefit significantly from eliminating processing costs.

I honestly shout about Zeffy from the rooftops to other nonprofits, because they're literally losing money going anywhere else. I can't express the pleasure it's been to work with a financial platform that doesn't view you as an 'account'.
— Bobby Kesselman, Hope Always Foundation Founder

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Still using PayPal? You might be losing more than just money

These eight organizations discovered what thousands of nonprofits already know: processing fees aren't just a line item on your budget — they're meals not served, students not supported, and families not helped.

From Dearborn Education Foundation's $2,812 in saved fees funding more student programs, to Sacred Portion's $9,350 going directly to vulnerable children, the pattern is clear. Every dollar lost to processing fees is a dollar taken from your mission.

The nonprofits in these stories aren't special. They're not tech-savvy or particularly business-minded. They're organizations just like yours that realized PayPal's familiarity was costing them too much. They made a simple switch to Zeffy — the only 100% free fundraising platform built specifically for nonprofits — and immediately started directing more resources toward their actual work.

Your donors give because they believe in your cause. Keep every dollar they raise with zero platform, transaction, or credit card fees. Funded entirely by optional donor tips.

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FAQs

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