It enables the exchange of money between online parties. In 2002, PayPal was purchased by eBay and integrated into the online auction house as the preferred payment method for buying and selling online. PayPal is now used by hundreds of retailers and auction sites around the world as well as a means of transferring money between individuals.
The PayPal system is fast, convenient and widely considered to be secure. Money is sent and received instantly, without any financial information being shared between the parties, which is a major advantage for those who want to shield their personal financial and credit card information from others. PayPal operates in 190 markets using 24 different currencies and has over 87 million active accounts, according to PayPal; it is one of the largest deposit holders in the world.
All you need to open a PayPal account is a valid email address. Once opened, you can upgrade your account to give you greater flexibility and to enable you to get money transferred to your regular bank account. You can also register credit and debit cards to your PayPal account, so effectively PayPal integrates with your wider banking facilities.
There is one issue with having your money in a PayPal account that needs to be taken into consideration. Unlike a regular bank account which you control, PayPal controls your account. If PayPal considers they have concerns about the validity of any transaction, they can simply freeze the account. At worst, PayPal can remove the money from your bank account and there have been issues with PayPal deducting money, often without prior notice. Once your account has been frozen, PayPal make the ultimate decision about the money in your account. It can take some time to sort out and, in the meantime, you have no access to funds. You only need to read the small print (and there’s a lot of it) to realize the power PayPal has over your money. Contacting PayPal can also be difficult. They want you to use their online help facilities, rather than make contact by phone, so they make it difficult to find the appropriate phone number. Calls are chargeable and there is a long pre-amble before you ever get to speak to someone.
The best advice is to use PayPal for your online transactions, but only put the money you need into your PayPal account. When you get paid by someone else, it is best practice to send it to your bank account immediately. This way, should your account be frozen, it’s likely to only be a relatively small sum and will largely leave your primary funds unaffected.
As far as sending money to loved ones, PayPal is one of the quickest ways. Once you click on “send”, the recipient gets the money in their PayPal account in a few minutes, and is almost instantaneous. The delay comes when you, or the recipient, want to withdraw the funds. A PayPal account is only a facilitator of money transfer. It moves money from one place to another at speed, but there is not an immediate withdrawal option. You don’t get an ATM card or similar, so the only way is to transfer your PayPal monies to your bank account, debit or credit card, and that takes time. Withdrawals are free if you take a longer transfer option, which can be four or five days. You can withdraw quicker (about 1 to 2 days typically) but you have to pay for the service and it still depends upon how your own bank operates. If you’re withdrawing a large sum it makes sense to opt for the faster service, but for small amounts, the cost can be prohibitively high as it’s a fixed fee and not based upon the monetary amount.
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