• +48 512084372
  • z.polkowski@ujw.pl




PayPal is a Web-based application for the secure transfer of funds between member accounts. It doesn’t cost the user anything to join PayPal or to send money through the service, but there is a fee structure in place for those members who wish to receive money. PayPal relies on the existing infrastructure used by financial institutions and credit card companies and uses advanced fraud prevention technologies to enhance the security of transactions [1].

Max Levchin and Peter Theil founded PayPal in 1998. Levchin and Theil hoped to make online shopping more appealing to the consumer by creating a secure payment system that would be as easy to use as taking money out of your wallet. To send money through PayPal, you just enter the recipient’s e-mail address and the amount of money you want to send them [2].

How PayPal Works [3]

The idea behind PayPal is simple: Use encryption software to allow people to make financial transfers between computers. That simple idea has turned into one of the world’s primary methods of online payment.

PayPal is an online payment service that allows individuals and businesses to transfer funds electronically. Here are some of the things you might use PayPal for:

  • Send or receive payments for online auctions at eBay and other Web sites
  • Purchase or sell goods and services
  • Make or receive donations
  • Exchange cash with someone

You can send funds to anyone with an e-mail address, whether or not they have a PayPal account. To receive the funds, though, the recipient must have a PayPal account associated with that e-mail address. Basic PayPal accounts are free, and many financial transactions are free as well, including all purchases from merchants that accept payments using PayPal [4].

If you have a PayPal account, you can add and withdraw funds in many different ways. You can associate your account with bank accounts or credit cards for more direct transactions, including adding and withdrawing money.

Signing Up for PayPal [5]

Signing up for PayPal is quick, and doesn’t even require you to enter any bank account information. To get started, just click the “sign up” link at the top of the site’s home page.

At the next page, you’ll choose whether you want a personal, business or premier account. If you just plan to use PayPal for the occasional eBay auction or online purchase, a personal account is the right choice. If you intend to use PayPal to accept payments for a business, then a business or premier account would be more suitable. If you select a personal account, you can upgrade in the future.


From there, PayPal asks for some basic personal information: your legal first and last name, address, telephone number and e-mail address. You’ll also need to check the box indicating that you agree to PayPal’s user agreement, privacy policy, acceptable use policy and electronic communications policy. Once you click to create your account, you’ll receive an e-mail with instructions for verifying your account and confirming your address.


PayPal Account Types [6]

PayPal has three account types: Personal, Premier and Business. All these account types can use the following core PayPal functions:

  • Sending money
  • Requesting money
  • Using auction tools
  • Making payments from a Web site
  • Debit cardservices
  • Customer service

Besides these functions, the three accounts also share certain features and limitations. For example, if you have a verified account, you can send up to $10,000 in a single transaction, and there are generally no transaction fees for sending and receiving money between PayPal accounts. However, you’ll pay a fee when using a PayPal debit card or receiving money for something that requires a currency exchange. Unverified accounts, including those without an associated bank account or credit card, have more restrictive sending and withdraw limits. You can determine the limits on your account by clicking a “view limits” link near the top of the page after you sign in to PayPal [7].

The three PayPal account types differ in some important ways. First, Personal accounts give you access to the core features, but that’s all. PayPal handles customer support for Personal accounts primarily by e-mail or through a virtual customer support agent at the PayPal Web site. There’s a phone number available, but it’s not toll-free and may have extensive wait times.

Premier and Business accounts are almost the same. The main difference is that a Business account must be registered with a business or group name, while a Premier account can be registered with a business, group or individual. Also, you can set up multiple users to access a business account.

In addition to PayPal’s core functions, Business and Premier accounts provide these options:

  • Accepting debit and credit card payments
  • Allowing senders to set up recurring payments (subscriptions)
  • Unlimited use of a PayPal ATM/debit card

Business and Premier Accounts also get a toll-free customer service number and extended customer service hours. These extra features come at the cost of transaction fees, which we’ll take a closer look at later.

If you’re starting your own PayPal account for a business, compare the fees and services from PayPal against other credit card transaction services to determine which works best for your needs. Consider that with PayPal, most of the code you’ll need to add to a Web site is automated for you, too. Shopping cart functions or “pay now” buttons may not be as easy to implement through other services.

Using PayPal: Sending Funds [8]

Though PayPal rose to stardom via eBay, one of the keys to PayPal’s success has been its ability to expand beyond that market. You can use it to send money to a friend, donate to charity and buy items online. In order to send money using your PayPal account, you’ll need one of two things:

  • Funds already transferred to your PayPal account before the transaction
  • An instant transfer account, usually a checking or savings account, from which PayPal will withdraw the necessary funds to cover the transaction

From there, it’s just a matter of knowing your recipient. To send money to a person, all you need is the e-mail address associated with that person’s PayPal account. For an organization or business, you can usually send money from a PayPal link at its Web site.

From the sender’s perspective, PayPal is a free service. In fact, if you send money directly from a checking or savings account, there are never any fees involved. The one exception would be if you pay for something by taking a cash advance from your credit card. While PayPal might not charge you for this service, your credit card provider probably will.

Using PayPal: Receiving Funds [9]

If you want to use PayPal to receive money, you have a range of options available. If you give someone the e-mail address associated with your PayPal account, that person can send you money from their own PayPal account. If you’re selling items on eBay, you can select PayPal as an option for accepting payment through eBay. If you’re selling from your own store or Web site, there are a number of options available for completing sales transactions with PayPal, including the following:

  • Adding a PayPal “buy now” button for each item you want to sell
  • Integrating a PayPal shopping cart with your Web site using the PayPal application programming interface (API)
  • Accepting payments offline or off-site to process later using PayPal’s Virtual Terminal

When you’re signed in to PayPal, click the “merchant services” tab to see all the options available to you as a seller. Cost and availability of these services depend on which Web site payments type you’ve selected for your account. You’ll have the “standard” type by default as a recipient, but you can upgrade to the “pro” type for a $30 monthly subscription fee. Merchants with a moderate to high volume of transactions each month should choose the pro type to avoid some of the fees commonly charged by other payment processing services, such as gateway and downgrade fees.

As a recipient, you can remove money from your PayPal account by making a withdrawal. These are your options for making the withdrawal:

  • Transfer money to a bank account associated with your PayPal account
  • Request that PayPal mail you a paper check for a certain amount
  • Make purchases using a PayPal debit card

Problems with PayPal [10]

Though PayPal does have millions of seemingly satisfied customers, not all users have had such a pleasant experience. In fact, so many people have felt slighted by PayPal that entire Web sites exist to discuss problems about PayPal and mock its business practices. The most prominent is PayPal Sucks.

The biggest criticism of PayPal is that it acts like a bank, but it isn’t regulated like one. This means that PayPal offers none of the protection that real banks offer, and it isn’t required to maintain any of the security, customer service or dispute resolution services that banks provide. At the same time, PayPal holds large amounts of their customers’ money, makes millions of financial transactions and even offers credit and debit cards.


Made by:

Sandra Mediuch

Bogdan Bortosu


[1], [2] http://searchmicroservices.techtarget.com/definition/PayPal

[3] http://money.howstuffworks.com/paypal.htm

[4], [7] https://www.paypal.com

[5] http://money.howstuffworks.com/paypal1.htm

[6] http://money.howstuffworks.com/paypal4.htm

[8] http://money.howstuffworks.com/paypal5.htm

[9] http://money.howstuffworks.com/paypal6.htm

[10] http://money.howstuffworks.com/paypal7.htm



Bogdan Bortosu
Translate »