Using PayPal for prize payouts

Our 501(c)3 has just started running a monthly event with an open section that has small “cash” prizes along side a scholastics event. We are looking for solutions to streamline the financial management. Most entries are in advance / online so we don’t tend to collect a lot of cash and it may not be enough to pay the cash prizes from day-of collections. At our first event in the monthly series, one of our officers went and got cash from his bank and our org reimbursed him, but this does not seem like an ideal solution.
I have heard that some organizers pay the “cash” prizes via PayPal. I understand that this can be done without incurring fees using the “pay to friend” option. Does anyone have experience or advice on this approach of using PayPal, or have an alternate recommendation?
Note: we use for the registrations. They recently switched from PayPal to Stripe for the payment processing, further complicating our financial management life :frowning:

I do not and will not use Paypal, but making payments when you don’t have sufficient funds in the account yet could get you into legal difficulties. And the ‘pay to a friend’ option isn’t intended to support payments from a business, so I wouldn’t count on them being free of charges.

I like Paypal as much as Mike Nolan does, and I also do not and will not use them. Since you say your prizes are small, then until your 501c3 org. builds up enough financial reserves to open a business checking account the option of having one of your members front you the cash and get reimbursed later seems as good as any.

As I understand it, Friends and Family just shifts the burden of the fees from the recipient to the sender. In any case, I’d be extremely reluctant to use it in any but the prescribed fashion.

What happens to the entry fees now? I presume they go to some sort of checking account? If so, draw checks on that account.

Alex Relyea

Doesn’t PayPal need to be connected to a checking account or credit card in the first place? If you have a checking account, use checks.

If you write checks for which the funds are not yet in the account, that can also get you in legal trouble.

Thank you for the feedback on this issue. We have plenty of funds and we do have a checking account, but the Treasurer (me) is not at every event. I passed the checkbook to another officer for the Aug event, but that is adding extra running around for physical possession and without knowing what checks were written, I can’t bring the books current, so was trying to avoid that. Not asking for a solution to the checkbook logistics, just explaining why seeking an electronic solution. We don’t currently have on-line bill payment with our checking account, but that will likely be my next avenue of investigation. Again, thanks for the feedback.

I’m not sure why the fact that someone other than the Treasurer (you) wrote the checks should prevent the requisite information getting to you so that you could keep the books current. When I was Georgia Chess Association President I was one of three people (Treasurer, 1st VP, me) who had check writing authority for the GCA. Since I was a TD at most all of our events I wrote most of the checks that needed to be written. That way the Treasurer didn’t need to be physically present. An email after the event to the Treasurer listing check numbers, recipients, and amounts paid let the Treasurer keep the books up to date.

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A checkbook with carbon copy checks makes it easier to have an exact record of what checks were written. Just be sure to put something between the check being written and the next check so that only the current check gets the copying.

Perhaps you could switch registration systems. works with PayPal. King Registration is based in Illinois but also handles tournaments from many different states, such as Wisconsin, Texas, Minnesota, New Mexico, Virginia, Iowa, California, Kansas, etc.

Bill Smythe

Much false information in this thread. There are several ways to pay electronically, they each have different benefits.

PayPal: One can use the pay friends feature if not doing it frequently - it’s not really designed for this. There is also some question from PayPal whether chess falls under gaming. But after significant attempts to clarify this with PayPal, it became clear that they use this more as a “threat” to avoid issues than a real concern.

PayPal does have another system, with minimal fees, called “Payouts.” One uploads a spreadsheet in a specified layout to make payments and deliver messages. This is the appropriate tool.

The negative comments in this thread about PayPal are strongly off the mark. I do encourage all users to use 2FA. Load Microsoft Authenticator on your phone for a code.

E-checksThese are also inexpensive. The DeLuxe Printing company, which prints checks for most US banks (look at your paper check) has an electronic payment exchange using an e-check. You make out the check online - it is sent to the recipient, and they can print it and take it to a bank, or even deposit it via their phone. So it acts like normal check except its provided via a secure link email to a secure site. If you order many at once the fee is low - quarter a check or so.

The ONLY issue I’ve had with this is when depositing by phone, ensure the name is exactly the same. One GM whose name is really Alexsey on his account had an issue when the check was made to Alex. It likely would have been fine if he had gone to a bank. It was a non-issue to cancel and resend with a new name.

VENMO Business AccountVenmo is also owned by PayPal and is a very easy way to pay prizes or vendors (TDs for example) using either email or cell phone numbers. I’ve had zero issues with this.

Zelle like VENMO also easily allows electronic payments by email or cell phone number.

In 3 years, the only issues I’ve had are:

  1. The name issue for checks mentioned above
  2. Someone gives me the wrong email account - AND doesn’t want to set up a PayPal for the email they gave me. In that case they have to wait 30 days for PayPal to cancel the transaction.

Those have been few and far between.

Banking is also important. Avoid fees. Several online banks are good at this. I use Novo, but there are others. When I have cash to park, I use Lending Club Bank because their 2.25% interest rate is above nearly anything else. I also maintain a nearby WinTrust/Village Bank for a Brick and mortar. None charge fees.

All easily tie to QuickBooks and other software to cut down on accounting work. I do find it worthwhile to pay for accounting/bookkeeping help.

Also, doing all entries online cuts down on input work, and eliminates bad checks. The only bad collectables I’ve had is when I inadvertently over-refunded someone.

If you go to King Registration - use Stripe for entry payments rather than PayPal - their recordkeeping is better. But PayPal is also available. Both tie well to Novo.

The other advantage apparent during COVID - people don’t have to wait around for their checks. Most times we get payments done within a couple of days. Because I’ve had several physical issues over the summer PLUS the deaths of elderly family members - we were slow on our last two events, but we’ve kept people informed and for the most part they’ve been very understanding.

Hope this helps. Yes - I did a lot of research before using any of the above.


Don’t know about VENMO, but doesn’t Zelle require both the sender and recipient to have accounts at banks which subscribe to it? In my experience, quite a few smaller banks don’t do that.

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Essentially that’s true of all the methods except the echeck. in our last couple of events, we’ve provided a Jotform that winners can fill out with their preferred method. We are finding that jotform types of tools and other online communications can help with running more efficient tournaments.

Thinking about it further, they all essentially have you sign-up so there is a secure transfer, echeck doesn’t require a bank

kevin, i just find it funny that a guy that runs “Caveman Chess” is so tech savvy! must be referring to the style of play. LOL.


Scot L Henderson

Have KB tell you the story how the “Caveman” name and KB got together!?

I saw an ad for Zelle over the weekend, the ad seemed to say they can send funds to any bank account.

I accept PayPal for entry fees.

I only use it for prize payouts when a player wins a shared prize where the share is less than the entry fee and the player consents to payment via a partial refund of the entry fee.

This approach claws back some of the “rake” that PayPal takes from each payment in a manner that is transparent to the player. It’s not much, but ours is a low margin business.

These are de minimis enough that 1099 obligations don’t come into play.

I use PayPal in conjunction with King Registration to enter tournaments.

One of the most prolific chess organizers in my area now pays out prizes using PayPal, at least for those players that have PayPal accounts. (Players with other accounts, such as Venmo, also can receive their prizes in a similar manner, I believe.)

In one event, I won a prize that was 3 or 4 times their typical entry fee. It went into my PayPal account as “PayPal balance”. Thus, in subsequent tournaments, I have been able to use the “PayPal balance” option to pay the entry fee. Sure enough, my PayPal balance gets reduced by the amount of the entry fee, and I don’t need to charge my credit card.

I have been wondering what will happen when my Paypal balance drops below the entry fee for the next event, but is still not zero. Will it let me use the balance, then use a credit card for the remaining amount? Or will it then refuse to let me use the balance, thus forcing me to maintain a small unusable balance until I win a prize again?

Enquiring minds want to know.

Bill Smythe