PayPal remains an incredibly popular way to make online payments. How exactly does the service work?
PayPal is very popular because it has a number of great advantages. Bank details and credit card information is not visible to both parties, which reduces the risk of fraud. You just need to know the corresponding email address. In addition, the payment method is supported by so many companies and individuals that there is a sense of trust and you can go almost anywhere with PayPal.
How does PayPal work?
If you want to send or receive a payment via PayPal, you must first create a PayPal account. Your email address will be verified and then you can add your bank accounts and credit cards to your account.
These are verified before you can use them. PayPal withdraws a small amount (a few euro cents) from your account or card with a description. In your PayPal account you then have to enter the size of the amount and the code in the description (you can see this on your statement or in your internet banking) so that PayPal can see that it is really your account. The amount that has been withdrawn from your account or card is now your balance in PayPal.
To pay someone, all you need to do is provide the email address they use for PayPal and the amount you want to pay. You can then choose from which added account or credit card the amount should be withdrawn. The same applies when someone wants to pay you: he or she only needs the email address that you have linked to your PayPal account.
In addition, PayPal offers good coverage when something goes wrong with a transaction, or when the goods or services paid for are not delivered.
You can transfer the money in your PayPal account (your PayPal balance) to your bank account (how long this takes depends on your bank), or leave it on PayPal to pay with it next time. You can also link your credit card or bank account to your PayPal account. If you pay via this option, PayPal will automatically debit the money from your bank account or credit card. In this case you only have to agree once.
PayPal is just as safe as a regular bank. The company takes extensive measures to prevent fraud, guarantees refunds for unauthorized payments from your account, and eBay purchases can be insured up to a certain purchase amount.
How does PayPal benefit?
PayPal charges a small fee for payments made with the service. When you buy something you don’t have to pay any fees, but when you sell something you will be charged a small amount plus a percentage of the sale amount.
Sometimes when you send money to an acquaintance or family member you are charged an amount, for example when you send money with your credit card instead of your PayPal balance, or when you send money abroad.
Cons
PayPal has some drawbacks. Currency conversion is very expensive – more expensive than at the bank and a percentage is added for the conversion of the currency.
Furthermore, your PayPal account will be blocked very quickly if it is suspected that fraud is involved. It can then take weeks before you can access your account again, because you first have to prove that everything is in order.
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