How Does Paypal Work: Understanding Paypal

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PayPal today is not a payment system: it’s a suite of many different payment systems. Paypal is located in San Jose, California. It was founded in 1998 and was acquired by eBay in 2002.

Paypal is one of the most popular trade names in ecommerce. There are over 50 million users who utilize the services of Paypal.

Here the payment transfers are done via e-mail payments.

The parties between whom the payment is exchanged cannot see each others credit card or bank information. It is somewhat similar to an escrow payment because it holds the money for the two parties thereby acting as a middleman.

Paypal keeps the information of its customers in an encrypted form. No one can decrypt the confidential information.

This specialty makes Paypal one of the safest gateways of transactions. Paypal is ideal for money transactions between strangers. It doesn’t matter which part of the globe you are sitting in.

Only two main requirements are essential to open a Paypal account, a valid e-mail address and a valid credit card or bank account.

Though Paypal is free for the buyers, the sellers have to give a fee of 1.9% to 2.9%.

The money is withdrawn from the buyer’s credit card or the bank account and there is no cost involved in paying the money to the Paypal users. Paypal will charge only if you receive funds in your account.

Paypal also works when you want to make payments to an online store apart from making payments to friends or business associates.

There are three types of paypal accounts; Paypal Personal account, a Paypal Premier account and a Paypal business account.

The features of the personal account are limited. Even though you can send and receive money to and from other Paypal account, you cannot receive money from credit cards or debit card payments. To activate this facility, you have to upgrade your status to a Premier account.

The fee structure is slightly different and you can get the details on the Paypal website. The Business account is best suited for people who are having huge business set-ups or are running large online stores.

It is useful if your transactions involve complex deals. You can always upgrade your existing Paypal account to the Business account. The process is very simple but you have to check the site to have a look at the fee structure.

Indeed, Paypal has become one of the most significant tools in eCommerce today.

Jenny How is full time eBay Powerseller and blogger, which publishes a blog about How To Sell On eBay, tips, news and resources. Her latest book “The eBay Niche Steal Report” reveals how what niches other Powersellers are making money from eBay now. You can download it free at

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