How Does PayPal Work?

What is PayPal?

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PayPal is a method for selling and buying things online and transferring money to friends and family in a convenient and inexpensive way, without requiring that you share financial information. With more than 400 million active account holders around the world, PayPal is a money transfer giant.

Because the service is so ubiquitous, many online merchants and customers know and trust it. Here’s what you need to know about how PayPal works.

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PayPal supports transfers to individuals in the U.S. — in many cases, for free. Here’s how:

To pay for online purchases using PayPal, the company lets you check out by logging in to your account and skip plugging in your financial, billing and shipping information on a retailer's site. Only PayPal will have your financial info.

Hundreds of thousands of online merchants offer PayPal as a payment option, including eBay, Walmart and Best Buy, and newer players such as Spotify and Uber.

PayPal Credit allows qualifying users to shop for an item online and pay for it later or over time with interest (23.99%) — acting basically like an online credit card. Avoid interest by paying off the full amount in six months on purchases of $99 or more.

PayPal’s mobile app lets you pay at participating brick-and-mortar stores by providing you a one-time QR code. You can look for PayPal QR codes at restaurants, stores, farmers’ markets and more.

PayPal is free to use if you’re:

Fees come into play if you're:

Sending cash to another country can get costly. Other international money transfer providers, such as  or , may offer cheaper ways to get money to family and friends overseas. (Compare providers and get details on fees at )

All PayPal transactions happen on web pages with Secure Sockets Layer encryption, a tool used by many other financial services providers. The company also has anti-fraud technology and monitoring services that operate 24/7.

PayPal’s purchase protection policy guarantees you a full refund on orders that never arrive, are significantly different from what you ordered or were not made by you.

That said, PayPal — like any other financial service — is not completely hacker- or fraud-proof. It’s a good idea to check your account transactions regularly and dispute any that you don’t recognize. Get familiar with PayPal’s . Report fake websites and suspicious emails to [email protected]

PayPal’s international transfer capabilities and wide acceptance at merchants separate it from some of its competitors, including — which is owned by PayPal — and Cash App. And when it comes to person-to-person transfers, PayPal offers terms similar to those offered by the other companies, with some exceptions.

Keep in mind that your recipient must have an account with the service to get paid through any of these methods.

Setting up your PayPal account online is a fairly simple process.

As many financial transactions shift online, it might be worth opening a PayPal account if only for the sake of convenience. If you don’t want to hop onto the PayPal train, however, look for other handy ways of sending money or paying for goods. (Read NerdWallet’s guide to some of.)

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