PayPal is a payment platform with a website and a phone app that allows payments between parties using online money transfers. PayPal customers create an account and connect it to a current account, credit card, or both.
After verifying their identity and confirming the availability of funds, users can send or receive payments online or in-store using PayPal as an intermediary. Millions of small and large retailers, both online and in the real world, accept PayPal payments.
In addition to online payments, PayPal offers a debit card for payments, credit card readers for business use, and lines of credit.
PayPal is considered a very secure method of sending payments online.
How does PayPal work?
PayPal offers payment services for consumers and merchants who accept Paypal. Merchants use a PayPal card reader in brick-and-mortar stores or enable Paypal as a payment method on their websites.
Consumers can pay bills and transfer money relatively easily. Cash can be transferred to any email address or phone number, regardless of whether the recipient has a PayPal account.
Users need an email address to register for an account and credit card, debit card, or bank account information to complete the setup.
PayPal verifies the information to ensure that the person setting up the account is the rightful owner before the service can be used.
Shoppers can choose the PayPal option to make purchases online if the retailer has this service. Transactions are completed in minutes and the company promises that transfers are available for payment or withdrawal to a bank account immediately.
PayPal for business
PayPal offers businesses a number of solutions for their day-to-day operations. This includes payment portals for online and in-person transactions, business management services, and lending and financing options. Business owners must also provide an email address to create an account.
PayPal tries to make online purchases safer by providing a form of payment that does not require the payer or recipient to disclose credit card or bank account numbers. This way, money is safe, privacy is protected, and because the customer base is so large, transactions are faster than traditional methods.
PayPal fees
PayPal generates most of its revenue from the fees it charges merchants, not from consumers who pay with it.
There is no fee for using PayPal to pay for a transaction if you use your PayPal balance or your linked bank account and the payment is made in your local currency. There is no fee if you are sending cash to a friend or relative rather than a company, again in your home currency. There are no fees for transferring money to and from PayPal and to your bank account.
Other transactions are subject to fees:
For most transactions that involve conversion, there is a 4% currency conversion fee.
A PayPal transaction that uses your linked credit card will charge a 2.9% fee plus a flat fee that varies by country. In the US, this is 0.30 cents
The trick here is to make sure your default PayPal account is for your checking account and not your credit card.
PayPal-branded credit and debit cards have their own fee structures, which seem pretty typical for the industry.
Other fees apply to less routine transactions, such as buying and selling cryptocurrencies and sending charitable donations.