What is PayPal?
PayPal is a digital wallet and platform 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.
PayPal snapshot |
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Fees:
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Transfer limits: Varies, $4,000-$60,000 per transaction. |
User experience: A payments behemoth with a clean website, top-rated mobile apps. |
Customer service: Live phone support available; support via the message center (when logged into your account) also available. |
» Looking to compare? Check out NerdWallet's top peer-to-peer payment apps
How to use PayPal
1. Send money to friends and family
PayPal supports transfers to individuals in the U.S. — in many cases, for free. Here’s how:
+ What to know about sending money
- Tools: You can use the PayPal site or PayPal's mobile app.
- You'll need: The other party’s name, PayPal username, email address or cell phone number — no need to exchange financial information.
- Pay with: Your bank account or PayPal balance for free, or a credit card, debit card or PayPal Credit for 2.9% of the amount sent, plus 30 cents.
- Limits: You can transfer up to $10,000 in a PayPal transaction, or up to $60,000 if you've provided your bank account data or other identifying information.
- Timing: Transfers to and from your bank account and PayPal account can take a few days. You also can pay a 1.75% fee for an instant transfer.
» More from NerdWallet: Top money transfer apps
2. Pay for goods online
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. PayPal’s capability as a digital wallet means that you’re able to keep a balance in your account that you can draw from, and/or you can pay with whatever debit or credit card information you keep in your PayPal account.
Hundreds of thousands of online merchants offer PayPal as a payment option, including major retailers such as eBay, Walmart and Best Buy, as well as companies such as Spotify and Uber. Note that some websites generally support PayPal purchases, but only if you live in certain countries.
3. Shop now, pay later
PayPal Credit has two formats: a digital credit line and the PayPal Credit Card. Both allow qualifying users to shop online and pay later or over time with interest (29.64% APR), but the credit card cardholders can make in-store purchases as well as online. Avoid interest by paying off the full amount in six months on purchases of $149 or more.
4. Buy items in stores
PayPal’s mobile app lets you pay at participating brick-and-mortar stores by providing you with a one-time QR code. PayPal QR codes can be found at restaurants, stores, farmers’ markets and more.
5. Bank with PayPal
PayPal offers the free PayPal debit card, which functions like a checking account. Learn more about it through NerdWallet’s PayPal debit card review.
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What are PayPal fees?
PayPal is free to use if you’re:
- Buying something from a website or in a store.
- Sending money to family or friends in the U.S. via a bank account or PayPal balance.
Fees come into play if you're:
- A seller using PayPal.
- Transferring money abroad.
- Performing an instant transfer.
- Using a debit card, credit card or PayPal Credit to transfer money to another person in the U.S.
Sending cash to another country can get costly. Other international money transfer providers, such as OFX or Wise, may offer cheaper ways to get money to family and friends overseas. (Compare providers and get details on fees at our guide to the best ways to send money internationally.)
PayPal fees: Summary
Opening a PayPal account | Free. |
Buying an item online or in store in the U.S. | Free. |
Sending money to friends or family within the U.S. using a PayPal balance or a linked bank account | Free. |
Sending money to friends and family abroad | 5% of transaction. |
Receiving money from friends and family in the U.S. | Free. |
Receiving money from friends and family abroad | 5% of transaction. |
Sending money to friends or family within the U.S. using a credit card, debit card or PayPal Credit | 2.9% of transaction plus 30 cents. |
Transferring money from a PayPal balance to a bank account | Free. If you want to receive a check instead, there is a $1.50 fee. |
Making an instant transfer from your personal PayPal balance to your bank account | 1.75% of transfer amount. |
Is PayPal safe?
Yes, PayPal is generally safe to use. 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 provides a way to get refunded 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 guide to common fraud activity. Report fake websites and suspicious emails to [email protected].
When to use PayPal vs. Venmo, Cash App or Zelle
PayPal’s international transfer capabilities and wide acceptance at merchants separate it from some of its competitors, including Venmo — 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. PayPal, Venmo and Cash App are standalone services with their own apps, whereas Zelle is a peer-to-peer transfer service that’s built into the online platforms of participating banks.
» MORE: Banks that use Zelle
Keep in mind that your recipient must have an account with the service to get paid through any of these methods.
Limits
You can send up to $4,000 in a single transaction with PayPal with an unverified account, and you can send up to $60,000 in a single transaction with a verified account, though PayPal may limit the amount to $10,000 depending on the currency. With Cash App, you can send up to $1,000 per month (though you can get a higher send limit by providing your full name, date of birth and the last four digits of your Social Security number). Unless you complete identity verification, your send limit with Venmo is $299.99 per week. With identity verification, Venmo users can send up to $60,000 per week. Your sending limits on Zelle will depend on what your bank allows, so check with your bank to find out.
Fees
You can send money for free using a debit or a prepaid debit card on Venmo, and Cash App only charges for personal payments made using a credit card. That credit card fee is 3% for Cash App and Venmo — similar to what PayPal charges for all card funding.
All three companies offer instant transfers of your balance to your bank account. Like PayPal, Venmo charges 1.75% per transaction. Cash App charges up to 2.5% of the amount transferred.
Zelle doesn’t charge any fees to send money, but you have to connect your bank account, so sending money via credit card isn’t an option.
Transfer timing
Moving money from your PayPal account to your bank account can take one to three business days. Transferring money from your bank to your PayPal account can take up to five business days. Transfers from Cash App and Venmo to your bank account take one to three days, according to the providers. For enrolled Zelle customers, money is typically available within minutes.
ALSO CONSIDER: Venmo || Zelle || Cash App || Apple Pay Cash || Top P2P payment apps
How to set up PayPal
Setting up your PayPal account online is a fairly simple process.
- Download the app or go to the website.
- Provide your:
- Name.
- Address.
- Phone number.
- Email address.
Should you use PayPal?
It might be worth opening a PayPal account if only for the sake of convenience. Many online merchants use the platform, and it’s a common money transfer service, especially for sending money internationally. If you don’t want to hop onto the PayPal train, there are plenty of other ways to send money and make purchases.
