How does PayPal work?

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How does PayPal work?
PayPal is a method for sending and receiving funds. (Sean Gallup/Getty Images News/Getty Images)

PayPal is a service that enables a person to send and receive payments over the Internet when selling or purchasing goods or services or making online donations. PayPal prides itself for being secure, and most online services accept payment through PayPal. PayPal is an effective and secure way to do business over the Internet.

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Getting Started

First, you need to open a PayPal account. All you need is an e-mail address to get started. From the PayPal home page, click on the “Sign up” link and follow the instructions. Once you have set up a PayPal account, then you are ready to send and receive money over the Internet.

Linking to Bank Accounts

You can link your PayPal account to your bank account so that you can transfer funds between your personal or business bank account and your PayPal account. The PayPal website provides instructions for how to do this. PayPal charges no fees to transfer money in or out of your bank account, and most banks do not charge for this service either. You can also link your PayPal account to a credit card, although many websites will not accept this form of payment because the website must pay higher fees for this service.

Sending Money

If you want to send money from your PayPal account, you can do this in two ways. One way is to click on the PayPal icon on a website. Most large websites provide PayPal as a payment option. Once you select what you want to purchase, you can click on the PayPal icon and follow the instructions. The other option is to enter the email address of the person you want to pay. As long as that e-mail address is linked to a valid PayPal account, the money will transfer from your PayPal account to the other person’s PayPal account.

Drawing Funds

You must have funds linked to your PayPal account to cover the cost of your purchases. If you link your PayPal account to a bank account, then PayPal will automatically withdraw the funds from your bank account to pay for your purchases. Alternatively, PayPal will charge your purchases to the credit card that you link to the PayPal account. You can set up your PayPal account in either manner.

Receiving Funds

If you want to receive money into your PayPal account, you can do this by asking the other party to send you a payment using your e-mail address. You can link multiple e-mail addresses to one PayPal account, so there is no need to open multiple accounts if you regularly use more than one e-mail address.

PayPal Fee

PayPal charges a nominal fee to the recipient of the funds. If you ask a person to pay you £65 through PayPal, you will see a small fee deducted from the amount you receive. There is no fee for the person who is using PayPal to pay for goods or services.

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