How does PayPal work?

[WarLocke]

I decided to check out the PayPal site earlier, since I'm seriously considering starting to buy stuff online, since it's often said to be cheaper and more convenient.

So I've browsed through some of the pages there, and even hit the 'Sign Up' button to see what kind of information they want. Nowhere anywhere on there does it say anything about charging money for an account (the free basic ones, anyway), and it seems the only verifiable info they want is an email address. They don't even ask for a bank account or credit card number or anything of the sort?

How does PayPal stay in business? For that matter, how do they keep people from signing up, 'buying' stuff, and then just not paying? I get the feeling I'm missing something really obvious here. :(

[Artega]

I've used PayPal frequently.

I've never really stopped to think where they get their funding from, however.

I know that they have some kind of partnership with eBay or something, and they offer a credit card, so that could be where it's from. I've also heard rumors that they sell off email addresses to sister companies and the like.

I've been verified (where you give them the data for a bank account - typically checking - including account number) for four months now, and have had no suspicious activities occurring. Then again, it would not make sense for PayPal to do something of that nature - they are not a fly-by-night organization. At least, not that I can tell.

[WarLocke]

I've been verified (where you give them the data for a bank account - typically checking - including account number) for four months now,

Whoops. Guess I'll have to get myself one of those 'bank account' thingymabobs first, then. I must be some evolutionary/societal throwback; I've always been a cash man.

The big reason that I got around to checking out PayPal today was this site. The prices were freaking amazing (strangely, they seem to have gone up about $8 over the course of the day...), and some of the posts in the thread that linked to it reported that they got their goods indeed, so it would seem to not be a fly-by-night operation...

[yangman]

Paypal charges fees for, IIRC, premium and buisiness accounts, which is a source of income for them.

Also, it's impossible to commit "buy and leave" since Palpal "credits" must come from a real source, either deducted directly from a credit card account, a bank account, or manually transfered through your bank.

[Count Duckula]

Paypal charges fees for, IIRC, premium and buisiness accounts, which is a source of income for them.

PayPal's main sources of income are eBay and other online auctions and premium accounts. PayPal offers a standard, business, and premium account. Standard is for when you transfer money to people (like donating cash to the Lounge *winkety* ) or purchase items from online stores that offer PayPal as a payment selection. Business accounts are for those online stores that want to offer PayPal as a way to pay, and charge about $0.25 (or is it 10%?) for every purchase made through PayPal. Premium accounts are paid accounts that come with a lot of goodies, including online auction trackers.

If you get a standard account, the chances of getting screwed over by PayPal are smaller, but still there. If you do get an account, DO NOT PUT MONEY INTO YOUR PAYPAL ACCOUNT. PayPal offers a "convenient" way to make fast transfers by a Patented System Whose Name I Am Forgetting Right At This Moment. Basically, the PSWNIAFRATM lets a user take money from his/her bank account and deposits those funds into this big "main account" thing. PayPal claims that the funds in the main account can be withdrawn and sent electronically back to the user's bank account, and the money is safe. Most PayPal fraud comes from this "main account" thing when PayPal vehemently denies that you have funds in the account, even when your bank account says you made a transfer. Am I getting confusing yet? :P

You're better off going to the post office and making out a money order. It's less than a buck if the MO's under $100.

[WarLocke]

You're better off going to the post office and making out a money order. It's less than a buck if the MO's under $100.

Maybe, but isn't the point of buying over the internet speed? Instead of going to the PO, mailing the money order off, waiting for it to get wherever, and waiting for my goods to get mailed, I just browse over, clicky-click, and the goods get sent off right then and there...

Is the whole PayPal fraud thing ver common?

[Nystul]

Maybe, but isn't the point of buying over the internet speed?

Not really, no. If you want something fast, your best bet is to check for stores within driving distance. The point of buying over the internet is incredible selection and/or great prices.

[Selby]

The point of buying over the internet is incredible selection and/or great prices.

Incredible selection is my only liking to internet buying. The prices may be better, but when you factor in shipping and wait time, it is cheaper to buy locally if you can. Only things that I can't get local do I search the internet for.

[dwa]

Maybe, but isn't the point of buying over the internet speed?  Instead of going to the PO, mailing the money order off, waiting for it to get wherever, and waiting for my goods to get mailed, I just browse over, clicky-click, and the goods get sent off right then and there...

Is the whole PayPal fraud thing ver common?

There's actually a whole site devoted to alleged incidences of PayPal screwing over businesses, though with a name like PayPalsucks, I doubt it'll be taken seriously.

Most instances seem to be Pay Pal locking out business accounts for "suspicious activities", such as being reported for non-receipt of goods, even when the seller can verify (via e-mail from buyer) that everything is Kosher.

Me, I've never been a victim, but as I've drawn back on my internet buying (and when I do, it's with amazon, who take check), I've pretty much ended my relationship with paypal.

[kandrathe]

My wife is a collector and she uses it all the time to pay for EBay purchases. Buyer's don't pay anything, but the Merchants are charged a % based on volume. For us it is linked to our checking account. She has used it probably 100+ times in the last year. If there are issues they are most likely related to Merchants not sending you what you thought you ordered.

[Dako-ta]

Hi, WarLocke,

PayPal is definitely not non-profit.

Although the sources of funds mentioned by others are probably significant - now - when PayPal first started up, their proposed source of funding was the 'float' (at least, I think that's what business/financial types call it, my memory might be confused on the issue :P ).

In other words, even though your money is in their possession for a very short time, and even if it's a small amount, multiply that by the total number of their users, and it adds up to a hefty sum. They can make money by using that money of yours, even if it's only in their account(s) for minutes.

When they proposed their business model, some venture capitalists/businessmen were very skeptical that it would work, but enough bought into the idea to get it off the ground, and seem to have been proven right.

I don't know for sure if they have their own team of money managers to use this 'float' or if they contract this out to some independent money-managing business, but I think they keep it in-house. I think somewhere on PayPal's website, they mention this is how they make most of their money. There's also an extra step you can take, if you regularly keep money in your PP account, where they will, IIRC, pay you some interest on the money. I've not paid much attention to that since I don't regularly keep money in my PP account.

Yes, you can sign up with them by providing a rather minimal amount of information. I've noticed lately, though, an increasing number of sellers will only take PayPal if you be have a verified account (I don't yet).

I'm not sure there is a way to use PP without having a checking account, or something similar, since that is one of the main pieces of info they ask for. Still, if you are still interested in PP, but don't want to get into the whole banking thing, it might be worth an e-mail to the PP staff to see if there is some other way to handle things.

I've read a few horror stories about PayPal; they do have some disgruntled ex-customers. However, most of these stories I've read involve business accounts, or larger sums of money, and/or the people writing the diatribes come across as being one of those unreasonable types that all businesses run into now and then.

I've used PP about 4-5 times, without any problems so far. I think as long as you stick to small amounts of money, there's not much chance for trouble. I think I might hesitate to use PP for amounts over a couple of hundred dollars or so, but maybe that's just me... (heh, of course on my current budget, that's all hypothetical anyway :D).

Hope this helps.

Regards,

Dako-ta

"What is the good of being a genius if you cannot use it as an excuse for being unemployed?"

-- Gerald Barzan

[Taem]

I like paypal. I use it at least once a month, if not more. When I sold Diablo items on eBay, its a must. I went for the Premium Account which was just what I needed at the time when I was selling fifty to a hundred diablo items a week, but now I wish I hadnt because they charge a few cents here and there and it all adds up, trust me! If i remember correctly, the Premium account allowed me to accept credit cards dirrectly, instead of paypal money only, which is a MAJOR plus to sellers.