What is PayPal And How Does It Work


PayPal is an American finance institution offering and supporting mobile wallet, online money transfers, sales and purchases. PayPal was founded in December 1998 as Confinity. As of Q1 2022, the company has 429 million accounts in over 200 countries and supports funds in 25 currencies.

PayPal Services

PayPal enables users to engage in a number of activities online. They include:

  • Online money transfer to family and friends.
  • Online shopping in over 200 countries.
  • Donate to non-profits.
  • Accept payments on your online store.
  • Cashing of checks using Cash a Check feature.

Recently, they even started integrating crypto in its ecosystem. This is a big move towards crypto adoption as PayPal is one of the leading companies in its field. Initially, you were only able to hold and transfer crypto between PayPal accounts which actually breaks the entire concept of crypto with freedom for the finance. But a few weeks ago PayPal announced that it allows its customers to transfer their crypto freely to whichever wallets or exchanges they want. This brought many positive Bitcoin news that positively affected the industry.

What is PayPal – How to Sign Up 

The sign up process is simple. You just need to visit PayPal website or app (Andoid and iOS) to sign up with only your email and password. To sign up you must be at least 18 years old. After signing up successfully, you will need a bank account or credit/debit card linked to your PayPal account to receive or transfer money. If you don’t have a bank account or a card, you can still receive money by check.

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To benefit from all PayPal services, your account needs to be verified after signing up. You can verify your account in several ways. For example, you can apply for a MasterCard, which will be used to confirm your physical address. Alternatively, PayPal will deposit micropayments into your bank account. You need to enter the amount of the deposit to verify you are the real owner of the account. You can also use a virtual credit card for PayPal verification. You can still use PayPal even if your account is not verified. Unverified accounts have a withdrawal limit of $500 and there are other services that you will not be able to use.

PayPal Accounts

Currently, PayPal has two types of accounts since it stopped offering premier account.

Personal. Recommended for individuals who shop and pay online, or wish to send or receive personal payments for shared expenses such as splitting of dinner bills or rental charges; for casual sellers or non-businesses who wish to get paid online, and who also make online purchases.

Business. Recommended for merchants who operate under a company/group name. It offers additional features such as allowing up to 200 employees limited access to your account and customer service email alias for customer issues to be routed for faster follow-ups.

You can open more that one type of account. But each account needs to have a unique email address, bank account, and debit or credit card.

How It Works

Adding and Withdrawing Money

Adding or withdrawing money from your PayPal account is done in different ways. You can do this through your bank accounts, credit/debit cards or requesting a check in the mail. You can also use a PayPal debit card to make purchases or get cash from an ATM.

Sending Money With PayPal

You can send funds to anyone with an email address even if they don’t have a PayPal account. If the person you sent the money to does not have a PayPal account, they will receive notification from PayPal, which they can accept by creating a PayPal account.

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Paying Online With PayPal

You can use PayPal to pay for goods and services online on millions of merchants in different currencies. Whenever you want to pay using PayPal, all you need is to login and you don’t have to enter your details every time. You can also link PayPal to your Facebook account to pay for Facebook ads. You can make payments using a number of options such as PayPal Cash, PayPal Cash Plus, a bank account, PayPalCredit, debit or credit cards.

To use PayPal as a payment option on Amazon you can use your PayPal Cash Card or your PayPal Business Debit Mastercard.

Accepting Payments

PayPal has helped millions of online merchants to accept payments online through PayPal Checkout. You can also receive recurring payments using the PayPal Subscriptions feature. In addition, PayPal Invoicing provides online merchats with a system for sending professional invoices to customers.

Cashing a Check

Cash a Check is a service that allows you to cash checks and have them credited to your PayPal account. You need to take a picture of the check you want to cash and send it to PayPal for review. If your check is approved, you have the option to pay a fee and get your money credited to your PayPal account in minutes. Alternatively, you can get your money in 10 days for free.

Donating to Charities

You can make the world a better place through charitable contributions using Paypal. All you need is to look for the PayPal donate button available on the websites of approved PayPal giving fund charities.


PayPal makes its profit by charging a percentage for some of its services. Opening a PayPal account is free and there is no a monthly fee or required minimum balance. Selling on PayPal is 2.9% + $0.30 per sale, discounted rate for eligible charities is 2.2% + $0.30 per sale. For international sales, there is 4.4% transaction fee plus a fixed fee based on currency received. Luckily, you don’t have to pay anything until you get paid for selling something. Buying online or in-store is free when you purchase in the US.

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PayPal money transfer within the US with PayPal Cash or PayPal Cash Plus balance or a bank account linked to PayPal is free. Sending using credit card, debit card or PayPal Credit attracts a fee of 2.9% of the amount sent, plus a fixed fee based on the currency of the transaction (see this table for fixed fee). There is no fee for transferring money from your bank account to PayPal.

You can save money on conversion fees when withdrawing money by linking your PayPal account to a virtual credit card or virtual bank account.

Is PayPal Secure?

Generally, PayPal is safe. Like many other international online payment platforms, PayPal takes the security of customers’ data and money seriously. All transactions are encrypted and monitored 24/7 for online fraud, email phishing, identity theft, etc. Your financial information is never shared with sellers. Moreover, you can pay using only your email address and password.

PayPal is not a bank, therefore it is not covered by the Federal Deposit Insurance Corporation(FIDC) but it keeps your money in in various FDIC-insured banks. In addition, Buyer Protection scheme ensures you get a full refund if you don’t receive what you bought.

Supported Countries

PayPal operates in more than 200 countries. However, different countries have different terms and conditions. For some countries, you can send money via PayPal but not able to receive. You can see the list of countries and what you are able to do with PayPal in those countries here.


PayPal is a credible online payment platform and one of the most secure and popular in the world. With a PayPal account, you can send and receive money, pay online as well as create a merchant account in over 200 countries.

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