PayPal dominates the digital payments space: it has over 426 million active users in over 200 countries and facilitated 6.6 billion payment transactions in Q2 2024 alone.
Since 1998, PayPal has given consumers an alternative way to buy online and send and receive money. With PayPal, you can make online payments using your bank account instead of a credit card, your payment information is hidden from merchants, and sending money is easy and often free. PayPal has effectively made checks and expensive wire transfer services obsolete.
PayPal has been around for decades and remains the number one choice for online shopping and money transfers. Here’s what you need to know to get started.
What is PayPal and how does it work?
PayPal is an online payment system that allows you to make online payments, including sending and receiving money, safely and securely.
Once you link your bank account, credit card, or debit card to your PayPal account, you can use it to make online purchases at participating merchants. PayPal acts as an intermediary between your bank and the merchant and stores your payment information securely.
PayPal also lets you securely send money to friends and family and receive money from others. This feature is useful for, say, splitting rent with a roommate or receiving money for your birthday.
What is PayPal Credit?
PayPal Credit is PayPal’s line of credit program. It’s like a virtual credit card, but it can only be used for online payments on websites that accept PayPal. Like a traditional credit card, PayPal Credit lets you defer payments.
What is the PayPal Cash Back Mastercard®*?
Need more flexibility in how you pay for your purchases? PayPal also offers a traditional credit card that earns you 3 percent cash back on purchases made through your PayPal account and on amounts sent using the card to other PayPal users. You get 2 percent cash back on all other purchases. The PayPal Cash Back Mastercard can be used anywhere Mastercard is accepted.
What is PayPal Pay in 4?
PayPal also offers a buy now, pay later program called Pay in 4, which allows users to pay for their purchases in four equal installments over six weeks. The program has no interest or fees and can be used to pay for purchases ranging from $30 to $1,500.
What is PayPal Monthly Payments?
PayPal offers an additional buy now, pay later program called Pay Monthly. This program is for large purchases from $199 to $10,000, but you must get credit approval to qualify. Purchases are subject to a 9.99 percent to 35.99 percent APR, paid in monthly installments over a 6-, 12-, or 24-month term. However, PayPal Monthly has no sign-up or late fees, and you don’t have to make a down payment on your purchase.
Why use PayPal?
Secure transactions
When you pay online with a debit or credit card, merchants may have access to your payment information. PayPal adds an extra layer of protection by preventing merchants from viewing your sensitive data. PayPal also uses a variety of features to keep your account safe, including end-to-end data encryption, optional two-factor account login, and email confirmation of transactions.
Easy and convenient
PayPal is accepted at over 35 million sites worldwide, including both online and offline retailers. In addition to paying with your linked bank account or PayPal balance, you can also pay with PayPal using your linked credit or debit card. That way, even if you don’t have your card with you, you can still pay directly by logging into your PayPal account or using the PayPal app.
Is PayPal free to use?
Creating a PayPal account is free, as are online purchases and most personal transactions, although PayPal does charge fees for certain types of transactions.
Purchase Fee
When you make an online purchase from a merchant that accepts PayPal, there is no fee unless a currency conversion is involved. Purchases in foreign currencies incur a 3 or 4 percent foreign transaction fee.
Personal transaction fees
If you send money to or receive money from friends or family for personal (not commercial) reasons, PayPal considers this a personal transaction. PayPal has a special “Friends and Family” tab you can click on when making a personal transaction. Some of these transactions incur fees, while others don’t, depending primarily on where you’re withdrawing and sending the funds from.
If you use a PayPal balance, bank account, or Amex Send account, there is no fee for domestic personal transactions, but a 5 percent fee (ranging from $0.99 to $4.99) for international transactions. If you send money using a debit or credit card, there is a fee of 2.9 percent domestically and 5 percent internationally, plus a fixed fee that varies by country ($0.30 for payments originating in the United States).
Sending money via Visa+ to a Venmo Visa+-enabled digital wallet is free, but sending money to other digital wallets incurs a 1.75% fee (ranging from $0.25 to $25).
Are there any fees for receiving money with PayPal? Generally, there are no fees. It is free to receive money from friends with PayPal, unless there is a currency conversion involved.
Withdrawal fees
There is no fee to transfer your PayPal account balance to a local account, but you will have to wait for the funds to be deposited. If you want instant access, there is a 1.75 percent fee. Additionally, if you withdraw a check from your PayPal account, there is a fee of $1.50 per withdrawal.
Other fees
Although less common, there are a few fees you may incur when using PayPal. These include various fees for buying, selling, and sending cryptocurrency, as well as fees for receiving and sending donations.
How to create a PayPal account
Before you open a PayPal account, you need to decide what type of account you want. PayPal offers two types of accounts: personal and business.
Personal PayPal account
A personal PayPal account is the most commonly used account for personal use. It’s the only account you need to send and receive money, and make online purchases with PayPal. With this account, you can also access your purchase history, link a new bank account, and add a credit card to your account.
PayPal for Business Accounts
PayPal also offers accounts that allow businesses to accept PayPal payments online, even if their customers don’t have PayPal accounts, and to accept credit and debit card payments online or in person. Service-based businesses and professionals can also send invoices to their customers and securely receive payments online through PayPal.
How to Create a PayPal Account
You can create a PayPal account from your computer, your mobile browser, or directly from the PayPal app. Here are the steps you need to follow:
- Visit paypal.com or download the PayPal app from the App Store or Google Play.
- Click the blue “Sign Up” button.
- Select “Personal Account”.
- Please enter your email address.
- Once you’ve added your phone number, you’ll receive a text with a security code to enter on the next screen.
- Please enter a secure password.
- Next, enter your legal first name, last name, and mailing address. Click the button at the bottom to accept PayPal’s privacy policy and create your account.
- Finally, add a credit card, debit card, or bank account to your PayPal account.
How to send money via PayPal
There are a few different ways to send money via PayPal. The method you choose will depend on where you’re sending the money, why you’re sending it, and the method you want to use.
How to send money to friends and family via PayPal
Whether you want to send your roommate money for rent or give your niece some cash for her birthday, follow these steps to pay friends and family via PayPal.
- From the PayPal app or your online PayPal account, press the “Send” button.
- Enter the name, username, email address or phone number of the person you want to send money to. You can also scan your friend’s PayPal QR code to get started quickly. If they don’t have a PayPal account, they can create a free account to receive your transfer.
- Enter the amount you want to send. You can also add a message, which helps remind you and your recipient what to do with the money. For example, you could type “July rent” or “Happy Birthday, Georgia!”
- PayPal will ask you to choose the purpose of your online payment: “Friends and family” or “Goods and services.” The latter will incur a fee that will be paid by the receiving account, so make sure you select the correct option.
- You’ll also be asked for a payment method. You can choose a payment method from accounts or cards already linked to your account, or add a new payment method.
- When you’re ready, review your selections and click Submit.
How to send money for goods and services via PayPal
For example, you might want to hire a landscaper to mow your yard and want to use PayPal to pay them, or you’re low on cash at the flea market and want to buy something from a business that accepts PayPal. Here’s how to send money for goods and services via PayPal:
- If the merchant has a QR code, press “Scan/Pay” in the app to get started.
- Otherwise, just hit the “Send” button from the PayPal app or your online PayPal account. Then enter the name, username, email address, or phone number of the person you want to send the money to.
- Enter the amount you want to send. You can add a note (such as “Lawn Mowing” or “Antique Dresser”) to remind the seller and yourself what the payment is for.
- PayPal will ask you if you want to send money to “friends and family” or pay for “goods and services.”
- If necessary, select a payment method or add a new payment method.
- Click Submit to finish.
Get paid through PayPal
Whether you’re looking to get money from friends with PayPal, get payments from customers with PayPal, or create invoices with PayPal, getting paid with PayPal is easy. Keep in mind that some payment options have different seller fees, so understand which option is best for your situation.
- From the PayPal app or your online PayPal account, press the “Request” button. Alternatively, you can create an invoice, depending on why you’re requesting payment.
- Enter the name, username, email address, or mobile number of the person making the payment.
- Click on “Request Money” or “Split Bill”. Then enter the amount you’d like to request and click on the “Request Now” button. You can also add a note explaining the purpose of your request.
- Your friends can also enter your email address or mobile number to initiate a payment via PayPal and send money to you.
- When someone sends you money, you’ll get a notification via email and in the PayPal app, and the money will be deposited into your PayPal account.
- You can store funds in your PayPal account and use them for future transactions or transfer them to your bank account.
PayPal Alternatives
Venmo
Venmo is a convenient mobile app owned by PayPal. Venmo has unique social networking features and offers free standard money transfers. The company makes money by charging fees for instant bank transfers, credit card transfers, and other services.
Cash App
With Cash App, you can send money from your phone and make purchases online and in stores. You can make purchases with Cash App using funds from your bank account, debit card, or credit card. If you don’t have a bank account, you can sign up for a Cash Card debit card that’s linked to your app balance. You can use your debit card or its digital wallet version anywhere Visa is accepted.
Skrill
Like its competitors, Skrill makes it easy for users to send money. Its biggest differentiator is that it doesn’t charge foreign transaction fees when sending money overseas from the U.S., but make sure you use your account regularly to avoid the $5 inactivity fee. Skrill offers users a Skrill Visa® prepaid card with a digital wallet option. The card has a loyalty program that allows you to earn rewards with every purchase.
Conclusion
For over 25 years, PayPal has made it safe and easy to send money online. Whether you’re splitting a bill with a friend or buying something from an online store, you can do so with PayPal, often without being charged a fee.
PayPal also makes it easy to pay in person with your linked credit or debit card. Just shop at millions of merchants around the world that accept PayPal and check out with the PayPal app. For even more flexibility, customers can also consider applying for a PayPal Cashback Mastercard®.
Information about the Paypal Cashback Mastercard has been collected independently by Bankrate. Card details have not been verified or endorsed by the issuer.
