How Does PayPal Work?

PayPal can no longer be dismissed as just a payment system as today PayPal incorporates several different modes of payment . As most of us are aware, PayPal situated in San Jose, California came into existence in 1998 and was subsequently acquired by eBay in 2002.

PayPal is one of the widely known trade names in realm of e-commerce. PayPal has grown tremendously and today more than 50 million people avail the services of PayPal where payment transfers are done through e-mails.

It is important to know that when the payment is exchanged, neither party will have access to information pertaining to the credit cards or bank details of the other. It resembles an escrow payment as it holds the money for the two parties functioning as a middleman.

PayPal retains all the data and sensitive information of its customers in an encrypted form to maintain total confidentiality. This unique facility makes PayPal a very secure transaction gateway and can be considered well-suited for money transactions between strangers belonging to two different corners of the world. To enjoy the facilities PayPal offers, the essential prerequisites are you have to open a PayPal account, have an e-mail Id and hold a valid credit card or bank account. PayPal is completely free for the buyers but the sellers have to pay a fee of 1.9% to 2.9%.

As the money is withdrawn from the buyer’s credit card or the buyer’s bank account, there is no cost involved in paying the money to the PayPal users. PayPal will instead collect fees only if you receive funds into your account. Other than making payments to friends or business associates, PayPal is also useful when you want to make payments to any online store.

It is worthwhile to know there are three types of PayPal accounts called PayPal Personal account, PayPal Premier account and PayPal business account.

The personal account has certain limitations. Even though you are free to send and receive money to and from other PayPal accounts, you are denied the facility of receiving money from credit cards or debit card payments. If you wish to enjoy this facility, you will have to necessarily upgrade the status of your Personal account to a Premier account. All these details as well as fee particulars are available on PayPal website. The Business account is more meant for people who run huge businesses or owners large online stores with heavy trade volumes.