What is PayPal?

what is PayPal (photo: Tom's Guide)

PayPal is the dominant player in digital payments, with over 360 million active users across 200 countries. In Q3 of 2020, it facilitated four billion payment transactions. 

Founded in 1998, PayPal provides consumers with alternative ways to make online purchases and transfer money. With PayPal, users can pay for things online using their bank account instead of a credit card, and their payment information is kept hidden from merchants. 

PayPal has made checks and expensive wire transfer services outdated. Despite its age, PayPal remains a top choice for online shopping and money transfers. To get started with PayPal, here's what you need to know.

What is PayPal and how does it work?

PayPal is an online payment system that provides a secure and safe way to make purchases online and transfer money. By linking your bank account, credit card, or debit card to your PayPal account, you can use it to buy items from participating online stores. PayPal acts as an intermediary between the merchant and your bank, ensuring that your payment information is kept secure.

In addition, PayPal allows you to safely send and receive money to and from friends and family. This feature is particularly useful for situations such as splitting rent or receiving birthday money.

- What is PayPal Credit?

PayPal Credit is a credit line program offered by PayPal, which functions similarly to a virtual credit card. It is limited to use for online payments on websites that accept PayPal. Like traditional credit cards, PayPal Credit allows you to postpone payments.

- What is PayPal Pay in 4?

PayPal provides a program called Pay in 4, which allows users to divide purchases into four equal payments over six weeks. This buy now, pay later program does not have any interest or fees, and can be utilized for purchases ranging from $30 to $1,500.

Read More: 25 Ways to Make Money Online, Offline and at Home

Why use PayPal?

- Secure transactions

Online purchases made with debit or credit cards may allow merchants to access your payment information, which can be a security risk. To address this concern, PayPal offers additional protection by ensuring that merchants do not have access to your sensitive data. In addition, PayPal implements multiple features to maintain account security, such as end-to-end data encryption, optional two-factor account logins, and email confirmations for transactions.

- Easy and convenient

PayPal is now widely accepted as a payment option and ranks as the fifth most accepted payment method, following Visa, Mastercard, American Express, and Discover. It is available on millions of online stores, making it easy and convenient for users to make online purchases. With PayPal, users can make payments using the cards linked to their account without the need to re-enter their card details. All that is required to make a purchase through PayPal is to remember or save your login information.

Is PayPal free to use?

photo: Tom's Guide

Setting up a PayPal account is free, and most online purchases and personal transactions are also free. Nevertheless, PayPal does charge fees for specific transaction types.

- Fees for purchases

When purchasing items online from merchants that accept PayPal, no fees will be incurred as long as there is no need for currency conversion. However, there is a foreign transaction fee of 3 percent or 4 percent for purchases made in a foreign currency.

- Fees for personal transactions

When sending or receiving money for personal reasons, PayPal categorizes it as a personal transaction. PayPal offers a "Friends and Family" option for personal transactions. Depending on the funding source and destination, some personal transactions may have fees while others may not. If you use your PayPal balance, bank account, or Amex Send™ Account for domestic personal transactions, there is no fee, but for international transactions, a 5 percent fee (between $0.99 and $4.99 USD) is charged. 

For domestic personal transactions using a debit or credit card, a fee of 2.9 percent is charged, and for international transactions, a 5 percent fee is charged, along with a variable fixed fee. Receiving money through PayPal is generally free unless there is a currency conversion involved.

- Fees for withdrawing money

There are additional fees associated with using PayPal, such as fees for withdrawing money. Although there is no fee for transferring your PayPal balance to a local account, there may be a waiting period before the funds are available. If you require immediate access, you will need to pay a 1 percent fee. Furthermore, if you withdraw money from your PayPal account by requesting a check, there is a $1.50 fee charged for each withdrawal.

How to make a PayPal account

In order to create a PayPal account, it is necessary to determine the type of account that is required. PayPal provides two options: personal and business accounts.

- Personal PayPal accounts

Personal PayPal accounts are the most frequently used type of account for individuals. It enables you to send and receive money, as well as make purchases online using PayPal. This account allows you to access your purchase history, connect new bank accounts, and add credit cards to your account.

- Business PayPal accounts

PayPal provides business accounts that enable businesses to accept payments online through PayPal, credit cards, and debit cards, both online and in-person, even if the customer does not have a PayPal account. Additionally, service-based businesses and professionals can send invoices to clients and securely receive online payments through PayPal.

- How to create a PayPal account

To create a PayPal account, you can use your computer, mobile browser, or the PayPal app. The following steps will guide you through the process:

  1. Visit paypal.com or download the PayPal app from the App Store or Google Play.
  2. Click the "Sign Up" button in blue.
  3. Choose "Personal Account."
  4. Enter your phone number to receive a security code via text for verification.
  5. Provide your legal first and last name, email address, and create a secure password.
  6. Enter your mailing address and agree to PayPal's privacy policy to create your account.
  7. Finally, add a credit card, debit card, or bank account to your PayPal account.

How to send money via PayPal

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There are various ways to send money through PayPal, and the option you choose will depend on the recipient, the purpose of the transaction, and the preferred medium of exchange.

- How to send money via PayPal to friends and family

To send money to friends and family through PayPal, follow these steps:

  1. Go to the PayPal app or log in to your PayPal account online and click on the "Send" button.
  2. Enter the name, email address, or phone number of the person you want to send money to. You can also scan your friend's PayPal QR code for a quick start. If the recipient doesn't have a PayPal account, they can create one for free to claim the money.
  3. Enter the amount you want to send, and you can add a message to remind you and the recipient of the purpose of the payment, such as "July rent" or "Happy birthday, Georgia!"
  4. Select the purpose of your PayPal payment as either "Friends and Family" or "Goods and Services." The former option does not incur any fees for the recipient, while the latter option triggers a fee that the receiving account has to pay, so be sure to select the correct option.
- How to send money via PayPal for products and services

Suppose you employ a landscaper to mow your lawn, and you want to pay the bill using PayPal, or imagine that you're at a flea market and you run out of cash, but the vendor accepts PayPal and you want to buy something from them. If you want to use PayPal to pay for products or services, follow these steps:

  1. If the vendor has a QR code, open the PayPal app and select "Scan/Pay".
  2. If the vendor does not have a QR code, select the "Send" button from the PayPal app or your online PayPal account. Enter the name, email address, or phone number of the person you are sending money to.
  3. Enter the amount you want to send, and add a note (e.g. "Lawn Mowing" or "Antique Dresser") to describe the payment.
  4. PayPal will ask you if you're sending money to "Friends and Family" or paying for "Goods and Services". Choose the appropriate option and complete the transaction.
Getting paid through PayPal

photo: LocalHost Digital

Receiving money through PayPal is easy whether you're wondering how to receive payments from friends, customers, or create an invoice on the platform. However, it's important to note that certain payment options may involve different merchant fees, so it's crucial to choose the best option that suits your specific situation.

To request money via PayPal, you can either use the PayPal app or your online PayPal account and click on the "Request" button. From there, you will have several options to choose from:

  • Enter the email or mobile number of the person who will pay you
  • Create a PayPal.Me link to share
  • Split a bill
  • Create an invoice
Alternatively, your friend can initiate a payment to send you money by entering your email or mobile number. When someone sends you money, you will receive a notification via email and/or the PayPal app, and the money will be deposited into your PayPal account. You can either keep the money in your PayPal account to use for future transactions or transfer it to your bank account.

Alternatives to PayPal

- Venmo is a mobile app that provides a convenient way to request money without charging transaction fees. Instead, the company makes money by charging fees for sending money via credit card and for instant transfers. Standard transfers are free. Venmo also has a unique social networking feature.

- Cash App allows users to send money and make online and in-store purchases from their phone. You can fund your Cash App with money from a bank account, debit card, or credit card. If you don't have a bank account, you can sign up for the Cash Card debit card, which is linked to your app's balance. You can use the debit card or the e-wallet version wherever Visa is accepted.

- Skrill is a platform that allows users to easily send money, with the biggest advantage being that it doesn't charge foreign transaction fees to send money abroad from the United States. However, users need to ensure that they use their account regularly to avoid a $5 inactivity fee. Skrill also offers The Skrill Visa® Prepaid Card with an e-wallet option, which includes a loyalty program that allows you to earn rewards for every purchase.

Read More: How To Get Free Money on Cash

Source: https://www.bankrate.com

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