What is PayPal? How do you use it? Everything you need to know

PayPal has been providing an alternative to cash and check transactions for nearly two decades now, but how much do you really know about the online financial giant? If someone asked you what PayPal is, would you be able to give a coherent answer after all these years of growth and change?

Years ago, it was best known for making payments on eBay, but now it’s expanded to hundreds of countries worldwide with millions of active customers. Keep reading for everything you need to know about the popular payment platform.

What is PayPal?

PayPal is one of the largest online payment transfer platforms globally, serving more than 200 countries in 25 currencies. Its long history, wide breadth of features, secure payments, and ease of setting up an account give it an advantage over competitors like Venmo, Apple Pay, and Stripe.

PayPal allows you to make purchases online via Amazon, eBay, and other retailers, or make simple money transfers between other PayPal accounts or supported bank accounts worldwide. With robust fraud protection for buyers and sellers, it’s one of the safest and most reliable ways to transfer money online. However, new accounts will have strict sending and receiving limits in place until you verify the account.

In recent years, PayPal has also issued cash cards and credit cards in select countries. However, keep in mind that PayPal is not a replacement for a bank account and should be treated as a supplementary payment service. They have also recently expanded into the world of cryptocurrency by enabling users to store Bitcoin in their PayPal accounts.

Is PayPal safe?

PayPal is safe to use for basic money transfers or buying products online. Its buyer protection program is similar to what you get with a credit card, and all data is encrypted and secure. Customer service isn’t as good as what you’d get from a traditional credit card company, so disputes on PayPal may take more time to settle.

For sellers, the matter is a bit more complicated. The company offers limited seller protection programs, but generally, the company will side with the buyer on disputed charges, even if the claims are questionable. PayPal is also not FDIC-insured, so you may lose your balance in the unlikely event that the company goes under. For these reasons, it’s generally fine to incorporate PayPal into your business, but it isn’t a replacement for a bank, which is more strictly regulated.

As always, you should take precautions with your financial data online. Use secure passwords and two-factor authentication. It also pays to be skeptical of non-reputable buyers or sellers, shipping only to verified addresses.

You may also want to tie your account to a credit card rather than a debit card and turn off instant transfers from your bank account. This will afford you the extra protection of disputing the claim with your credit card company in addition to PayPal. Plus, bad actors won’t be able to drain your bank account before you can do anything about it. You can also add prepaid cards to PayPal from brands like Visa and Discover, another way to protect your actual bank account from fraud.

How to send money to friends and family with PayPal

Sending money to friends and family is one of the main features of PayPal, especially for those without reliable banks or those living abroad. The entire process can be done in under a minute from your smartphone or PC, and all you need is someone’s name, email address, or phone number. Sending it to someone directly to the Cash app is not possible, but there is a workaround.

Of course, to send money using PayPal, you have to have money in your account. Once you have a balance, you can use it for things such as paying recurring monthly subscriptions.

How to receive money on PayPal

Receiving or requesting money on PayPal is also very easy. You don’t need to do anything to claim money that’s been transferred to your account. Once the transaction finishes, you will receive a notification, and the funds are ready to be used.

To request money, go to the Transfers page and click Request. You can even request money from people who don’t already have an account under certain circumstances, although they’ll have to create an account to pay you. Once the money has been sent and the funds have cleared, you will see it appear on your PayPal balance. However, there may be cases where PayPal temporarily puts the transferred funds on hold. Once the funds have cleared, you can then transfer them to your external bank account.

If someone is sending you funds that you don’t want to receive, you can block that person in your PayPal account.

How to use PayPal on Amazon

Amazon has long eclipsed eBay as the largest online retailer, but it’s possible to use your PayPal account to make purchases on the retail giant. There are a few extra steps beyond just tying the two accounts together. Here’s a brief version of how to use PayPal on Amazon.

First of all, you need to get one of PayPal’s physical cards, which vary from simple Cash Cards to Business Debit Mastercards, depending on your account type. These cards function just like any other Mastercard, although they are only available for accounts in the United States. Once you have one, enter your card number in Amazon during the checkout process.

If you’re still a bit fuzzy on the details, check out our full guide on using PayPal with Amazon. There are a few other methods in there that don’t require applying for a card, which is a great alternative for anyone living outside of the United States.

Can I cancel payments if I make a mistake?

Whether or not you can cancel a payment depends on whether the recipient has a PayPal account. If they have a PayPal account, the funds are transferred instantly and cannot be retrieved. In these cases, your best option is to ask the other party to send a transfer of equal value to return the funds.

However, if the recipient does not have a PayPal account, the money will be in limbo until they create an account to claim it. This might not sound like a big safety net, but if you misspelled the address, it’s possible that it doesn’t exist and will never be claimed.

If the address does exist, PayPal will send an email notifying them that there is money waiting for them, so be sure to act quickly. You can find the complete steps in our guide to canceling a PayPal payment.

What other major stores accept PayPal?

Apart from eBay and Amazon, millions of online stores accept PayPal. These include Samsung, Apple, Walmart, Home Depot, Best Buy, Target, Walgreens, and many more. Other apps and services like Spotify, Steam, Netflix, Facebook Marketplace, and Discord also fully support the service.

It’s worth noting that even if an online store accepts payments from the service, the physical store may not. You may still be able to use your account with one of PayPal’s Mastercards, which we touch on below.

What major stores accept PayPal will also vary depending on where you live, with stores in the United States much more likely to support the service than in other international markets.

How to use PayPal in a store

To use PayPal in a physical store, you have two main options. The first is to use your phone’s NFC, just like other mobile payment apps like Google Pay, Apple Pay, Samsung Pay, etc.

The other option is one of PayPal’s Mastercard-backed physical cards. There are several types of these cards, and which one you can apply for will depend on whether you have a personal or business account. These cards can be used just like any other Mastercard in stores, even if they don’t explicitly support PayPal.

What is PayPal Credit, and how do you use it?

PayPal Credit is similar to a traditional credit card, but it simply uses your PayPal account instead of a physical card. It isn’t available in all countries in which the company operates, but the application process is simple and can be done online.

PayPal Credit has several benefits, like interest-free payments for six months on purchases over $99. Although you are still subject to approval, results are typically given within seconds of your application.

So how do you use PayPal Credit? Once you’ve applied and been accepted, it works just like your normal account. Many online stores that accept PayPal will also accept PayPal Credit, and instead of deducting the cost from your account, the amount will go onto a line of credit.

However, if you have instant transfers enabled on your account, PayPal may transfer the amount directly from your bank account. Be sure to check your settings beforehand, or you may be instantly charged the total purchasing price instead of having the amount sent to your credit balance.

There is no card number or physical card associated with your PayPal Credit account, and you cannot use the service in physical stores. This makes it significantly more limited than traditional credit cards, so bear that in mind before relying too heavily on it. It does offer purchase protection, so you don’t need to worry too much about fraud or stolen accounts.

Other FAQs about PayPal