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How does PayPal work?

How does PayPal work?
Image source: Getty Images


PayPal is an online payment system with over 250 million active users all over the world. PayPal works by connecting your bank account or credit card to a virtual account so you can send money online quickly and safely. 

How do you get your money?

PayPal works by sending and receiving money using only a secure online account.

Your PayPal account is connected to your credit card or bank account and funds are taken directly from there and sent to the recipient’s PayPal account. From there, the person can then use the money to make payments online or transfer it to their own bank account.

In addition to sending money to family and friends, PayPal works by allowing you to make payments at online shops or sites like eBay.

As long as the website has the PayPal logo on it, you are able to make payments using the service during checkout. You’ll need to log in to your PayPal account during the process to authorise the payment.

Is there a fee to use PayPal?

Creating an account with PayPal is easy and free. You just need to enter your email address and some basic information to set up your account. 

When you send money to friends and family members or other users in your country using your PayPal balance or bank account, the process is free.

How does PayPal work with commercial payments? There is no fee to use PayPal to pay for goods or services. It’s the seller or the business receiving the money that has to pay a fee when you send them money.

However, there are fees for using the service to:

  • Receive payments from a purchase
  • Send or receive money to another country
  • Send money using a debit or credit card

So, there are fees if you’re transferring money to somebody abroad and there’s a currency exchange involved. If you’re sending money internationally, Transferwise is usually a cheaper option.

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Can you get scammed using Paypal?

PayPal offers secure encryption and anti-fraud technology so your transactions are always safe.

PayPal scams work only through third-party intervention. This involves scammers using spam, phishing and other kinds of fraud to cheat people out of their money.

For example, you might receive an overpayment from somebody who then asks you to send back the difference. The catch is that the payment has usually been sent from a fraudulent account and the money might later be taken back.

Other common PayPal scams include amazing prize winnings for which you have to pay a shipping fee, high-profit investments that require a fee or fake charities. As a general rule, if you receive an unexpected message asking for any kind of payment via PayPal, be suspicious.

Who are PayPal’s competitors?

PayPal has a few main competitors but they all have drawbacks. While PayPal works on many websites and is accepted by many merchants, its competitors aren’t as popular.

  • Skrill, one of the best-known alternatives, has no fees for deposits or withdrawals but not many online retailers accept it.
  • Payoneer is another competitor that works well for transfers but you cannot use it to shop online.
  • Google Pay is more popular and more widely accepted and transfers to debit cards are instant. Still, it’s not as widely available for online payments as PayPal is right now.

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