Paying online can feel risky if you have to hand over your bank or credit card details to every website. That’s where PayPal comes in. It’s a secure payment platform that lets you shop, send, and receive money without sharing your financial information directly with merchants.
Since launching in 1998, PayPal has grown into one of the world’s most widely used payment services, with hundreds of millions of users across more than 200 countries. Whether you’re splitting dinner with friends, running an online business, or checking out on your favorite shopping site, PayPal makes the process faster and safer.
Here’s everything you need to know about how PayPal works, what it costs, and whether it’s the right payment option for you.
Key Takeaways
- PayPal is an online payment platform that lets users send and receive money or make purchases without sharing financial details with merchants. It connects to bank accounts, credit cards, or debit cards for funding transactions.
- It offers both personal and business accounts, each with features tailored to everyday payments or business needs like accepting payments and managing invoices.
- PayPal is known for strong security, including two-factor authentication and purchase protection, helping keep transactions and personal information safe worldwide.
What Is PayPal and How Does It Work?
PayPal is an online payment platform that lets people and businesses send, receive, and spend money without sharing sensitive bank or card details with merchants. By linking a bank account, debit card, or credit card, PayPal acts as a secure middleman between you and the seller.
A PayPal account works much like a digital wallet. You can log in through the website, mobile app, or even use PayPal in person at participating retailers. The company, headquartered in San Jose, CA, also owns Venmo and Braintree, giving it a major footprint in the global payments space.
Using PayPal for Online Shopping
Many websites display the PayPal button at checkout. To pay, simply log in, confirm your funding source, and complete the transaction. The money comes from your PayPal balance or linked account, and the seller never sees your bank or card number.
Sending Money With PayPal
Once your account is set up, you can send money to friends or family by entering their email address or PayPal username. Payments funded by your PayPal balance or bank account are typically free within the U.S., though fees apply for card payments or international transfers.
Receiving Money Through PayPal
Getting paid is just as simple. All the sender needs is the email address connected to your PayPal account. Payments arrive in your PayPal wallet, where you can either use the balance for purchases or transfer the funds to your bank account.
How to Create a PayPal Account
Creating a PayPal account is free and only takes a few minutes. You’ll need to provide personal details, link a funding source, and complete basic verification. PayPal offers two account types: Personal and Business.
Setting Up a Personal PayPal Account
A personal account is best if you want PayPal for online shopping, sending money to friends, or receiving small payments.
Steps to create a personal PayPal account:
- Go to PayPal’s website and click Sign Up.
- Select Personal Account.
- Enter your name, country, email address, and phone number.
- Verify your account through the email PayPal sends you. You can also enable phone verification for extra security.
- Link a debit card, credit card, or bank account to fund payments and withdrawals.
- Complete PayPal’s ID verification process if you want to withdraw funds to your bank.
Once set up, you can use PayPal immediately to shop online, send payments, or receive money.
Setting Up a Business PayPal Account
A business account is designed for merchants who want to accept card payments, send invoices, or give customers a one-click checkout option.
Steps to create a business PayPal account:
- Go to PayPal’s website and click Sign Up.
- Select Business Account.
- Enter a business email address not already tied to a personal PayPal account.
- Provide basic information about yourself and your business.
- Add details such as your website, monthly sales volume, and business type.
- Verify your account via email.
- Link your business bank account so you can receive customer payments.
Once complete, you’ll be able to accept online payments, create invoices, and access PayPal’s suite of business tools.
PayPal Fees Explained: What You’ll Pay and When
It’s free to open a PayPal account, and many transactions don’t cost anything. But depending on how you use PayPal, certain fees may apply. The exact cost depends on the type of payment, the country involved, and whether you’re using a card or your PayPal balance.
No-Fee Transactions
- Online purchases: Paying with PayPal at retailers is free as long as no currency conversion is involved.
- Domestic transfers: Sending money to friends and family within the U.S. using your PayPal balance or linked bank account is also free.
Instant Withdrawal Fees
You can move money from PayPal to your bank account for free, but it usually takes one to three business days. If you need funds right away, PayPal offers instant transfers for a 1% fee (capped at a set maximum). You can also request a paper check for a $1.50 fee.
International Transaction Fees
Sending money abroad or paying in another currency comes with extra charges:
- PayPal balance or bank-funded transfer: 5% of the amount sent (minimum $0.99, maximum $4.99).
- Card-funded or PayPal Credit transfers: 2.9% of the amount plus a fixed fee based on the currency.
Currency Conversion Fees
If PayPal converts your money into another currency, you’ll pay an additional 3% to 4% conversion fee. This applies to both purchases and transfers where a different currency is involved.
PayPal for Business
A PayPal business account includes all the standard features of a personal account but adds tools designed for merchants who want to accept payments, manage sales, and access financing.
Payment Services
Businesses can accept multiple types of payments through PayPal, including:
- Debit and credit cards
- PayPal Checkout and PayPal Credit
- Venmo payments
- Digital wallets like Apple Pay and Google Pay (via PayPal integrations)
PayPal Business Debit Card
The PayPal Business Debit Mastercard® gives business owners instant access to their PayPal balance. It earns 1% cashback on eligible purchases and comes with a daily spending limit of $3,000.
PayPal Shipping
With a business account, you can purchase discounted UPS and USPS shipping labels directly through PayPal. Tracking numbers are automatically stored in your account, making Seller Protection claims easier.
PayPal Invoicing
PayPal offers free invoicing tools so you can create custom invoices, track billing history, and accept partial payments. Invoices can be sent by email or shared with a link.
PayPal Business Loans
PayPal provides two financing options:
Working Capital Loan: Based on your PayPal sales history. You’ll need at least $15,000 in PayPal sales in the past year. Payments are taken as a percentage of future sales, and funds can be available within minutes of approval.
Business Loan: For companies with at least nine months in operation and $33,300+ in annual revenue. Funding amounts typically range from $5,000 to $100,000 with fixed weekly payments and terms from 17 to 52 weeks. Money can arrive as fast as one business day.
Benefits of PayPal
PayPal remains one of the most widely used payment platforms because it offers clear advantages to both consumers and businesses.
Free and Easy to Use
It costs nothing to open an account, and many transactions—like online purchases or domestic transfers funded by a bank—have no fees.
Safety and Security
PayPal uses encryption, two-factor authentication, and purchase protection to safeguard transactions. Sellers never see your bank or card number.
Faster Checkout for Businesses
PayPal streamlines the checkout process, which can increase completed sales. Customers appreciate being able to pay with one login instead of typing card details.
Global Reach
PayPal operates in over 200 countries and supports dozens of currencies, making international commerce more accessible.
Flexible Spending Options
Beyond sending and receiving payments, PayPal offers PayPal Credit, debit and credit cards, and the ability to withdraw cash at ATMs (fees apply).
Access to Capital
PayPal’s loan programs and business debit card provide merchants with quick access to working capital and ongoing spending flexibility.
Best PayPal Alternatives
Not everyone wants to use PayPal, especially if fees or account holds are a concern. Here are three popular alternatives:
Cash App
Cash App is simple for peer-to-peer payments and lets users buy Bitcoin or invest in stocks. It’s especially popular in the U.S. for splitting bills and transferring money quickly. A Cash Card (Visa debit) gives instant access to your balance, and many users prefer its low fees compared to PayPal.
Payoneer
Payoneer is strong for international business payments. It’s widely used by freelancers, contractors, and global e-commerce sellers. It supports over 150 currencies and allows direct transfers to local bank accounts worldwide.
Stripe
Stripe is a powerful choice for businesses that need customization. It integrates with thousands of apps and supports recurring billing, advanced analytics, and global payments. While it requires more setup than PayPal, it’s often the preferred option for developers and fast-growing online businesses.
Frequently Asked Questions
Is PayPal safe to use?
Yes. PayPal uses end-to-end encryption, two-factor authentication, and other security measures to keep your information protected. It’s widely considered one of the safest ways to send and receive money online.
Does PayPal offer purchase protection?
Yes. Eligible purchases made with PayPal are covered under their purchase protection policy if you report any issues within 180 days. This coverage typically applies to items that never arrive or are significantly different from the seller’s description.
What are the benefits of PayPal Credit?
PayPal Credit allows you to make purchases with the option to pay over time. It offers no annual fees, promotional financing on certain purchases, and a convenient way to manage larger expenses.
Does PayPal do currency conversion?
Yes. PayPal automatically converts currencies for international payments, though a small conversion fee applies—typically between 3% and 4%, depending on the transaction.
How long do PayPal transfers take?
Transfers to your bank account usually take one to three business days. If you need funds immediately, PayPal offers instant transfer options for a small fee.
Can I cancel a PayPal payment after sending it?
Sometimes. If the payment is still pending, you may be able to cancel it yourself. If it has already been completed, you’ll need to request a refund from the recipient.
