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Over 300 million people and businesses around the world use PayPal to send money, receive money, and shop online. In addition to digital payments, PayPal offers other financial services such as debit cards, prepaid cards, credit cards, and lines of credit. If you don’t already have a checking or savings account, you may be considering using PayPal as your day-to-day banking solution. After all, PayPal offers convenience and a digital first experience.
However, while PayPal offers similar functionality to a bank, PayPal is not a bank and does not provide the same range of financial services. Depending on what you need from your banking relationship, PayPal may or may not cover all the bases.
Here’s a closer look at PayPal, and the financial products and services it offers, to help you decide if it’s right for your goals.
What is PayPal and how does it work?
What is PayPal?
PayPal is a digital payment company available in over 200 countries. It offers the possibility of carrying out transactions in 25 currencies. And it was one of the first companies to make it easy and secure for people to shop online and send money to people electronically. Although PayPal is not a bank, it partners with banks, such as The Bancorp Bank and Synchrony Bank, to offer various products such as debit cards, prepaid cards, credit cards and lines of credit. .
How it works?
PayPal allows you to connect an external bank account, credit card and debit card and use the service to shop securely online. It acts as an intermediary between your payment method and merchants, thus protecting your payment information.
You can also use PayPal to make online payments or to send and receive money between friends, family and business partners.
Do you need a bank account for PayPal?
No, you don’t need a bank account to sign up for PayPal or to receive payments. You can, however, connect your PayPal account to a bank account, debit card, or credit card account to send and receive payments and transfer funds.
PayPal products and services
PayPal offers several banking products and financing options:
- PayPal Cash and Cash Plus accounts. If you want to keep money in PayPal, you will need a PayPal Cash or PayPal Cash Plus account linked to your personal account. These two cash balance accounts allow you to send money from your PayPal balance, keep money in PayPal, and purchase in-store with your balance with Google Pay or Samsung Pay (if accepted) . PayPal Cash Plus is a more advanced account that you get when you apply for a PayPal Cash Mastercard or sign up for direct deposit to automatically add your paychecks to your PayPal balance.
- PayPal Cash Mastercard. This debit card allows you to use your PayPal balance to spend money online or in stores, anywhere Mastercard is accepted, just like a bank account with a debit card. You can also use this card to withdraw money, free of charge, from over 33,000 MoneyPass ATMs around the world. There is no monthly fee, no minimum balance, and no credit check to get this card. Receipt of this card also makes your PayPal Cash Plus account balance eligible for FDIC pass-through insurance, through one or more partner banks. (More information on FDIC insurance below.)
- PayPal Prepaid Mastercard. This prepaid card gives you a convenient way to manage your spending, while also giving you the option of setting up a graduated rate savings account that offers 5.00% APY on an average daily balance of $ 1,000 or less. Any portion of the balance over $ 1,000 earns 0.50% APY. This account is insured by the FDIC through Bancorp Bank.
- PayPal Cashback MasterCard®*. This credit card pays 2% cash back on all purchases where Mastercard is accepted, with no annual fees and no category restrictions.
- PayPal Extras Mastercard*. This credit card offers reward points for spending in specific categories. Cardholders earn three points per $ 1 spent on gasoline and restaurant purchases, two points per $ 1 spent on PayPal and eBay purchases, and one point per $ 1 spent on all other purchases. You can redeem rewards for cash back, travel vouchers, gift cards, or merchandise.
- PayPal credit. This is a reusable digital line of credit that allows you to pay over time for purchases of $ 99 or more. If you repay your purchase within six months, you will not owe interest. There is no annual fee and you can use PayPal credit anywhere PayPal is accepted.
- Pay in 4. This is a buy now, pay later option that allows you to use PayPal to pay for a purchase in four installments, with payment every two weeks. These installments are interest free and using this option does not affect your credit score.
Can PayPal be used as a bank account?
PayPal offers several financial products and services that can meet the banking needs of some people. You can use PayPal to pay your bills, online or from the PayPal app. If you’re looking for a convenient way to get more out of your PayPal account, some of the PayPal credit cards, debit cards, or funding options may be of use to you.
Especially if you cannot qualify to open a traditional bank account due to a bad ChexSystems score, PayPal can provide an efficient way to manage your money.
PayPal itself is not a bank, so if you leave money in your PayPal account, that money is not FDIC insured the same way it would be in a bank account. If you want FDIC insurance for your PayPal balance, your best option is to apply for (and receive) a PayPal Cash card.
Once you have a PayPal Cash card, PayPal will begin depositing your funds into a joint account held by PayPal at an FDIC insured bank. PayPal’s intention is to provide these funds with pass-through FDIC insurance up to applicable limits. That being said, if you keep a large amount of funds in your account, we recommend that you use an account that offers direct FDIC insurance.
PayPal also doesn’t offer the same range of financial products and experiences as a full-service bank. A small example: PayPal does not provide paper checks, often a standard feature offered with checking accounts found at banks. And, if you want the in-person experience of a traditional bank, PayPal is not the service for you. PayPal also does not provide other products and services that you can find at a full-service bank, such as auto loans, mortgages, home equity lines of credit, or wealth management.
Alternatives to PayPal
PayPal may not be able to replace the bank. If you want the protection and convenience of a bank account or cash checking account, PayPal might not be the best choice. While PayPal can provide useful financial products and tools for online payments, you may want to look elsewhere for the relationship that will serve as your financial foundation.
Here are some alternatives to using PayPal as a bank account:
- Consider a credit union. If you haven’t had a good experience as a customer of a bank, or if you want an alternative to keeping your money in banks, you can try becoming a member of a credit union. Credit unions are community-owned and member-owned non-profit organizations. As such, they tend to charge lower rates and provide better deals to their members.
- Try out the mobile banking features. If you like the first digital experience of using PayPal, consider checking out the latest features of mobile banking apps offered by banks and credit unions. Many banks have improved their digital experiences, providing better tools and features for customers, such as advanced account information and automated savings.
- Get a second chance bank account. If you have a history of bank account closures or other bad grades on your banking history, you may want to apply for a second chance bank account. These accounts, offered by some banks and fintechs, help people get a fresh start in banking.
PayPal offers great options and value-added services for people who want a debit card, prepaid card, cashback credit card, access to small lines of credit, and convenient online payments. But if you want a full-service banking experience, using PayPal as your bank account may not provide the range of services and tools you need.
You may find that you get the best experience with your PayPal account while relying on a bank or credit union as a stable base for your money. Using PayPal in addition to a bank account, and not PayPal as the sole bank account, may provide the best functionality. That said, if you use PayPal as your primary financial account, it ultimately depends on you and your needs as a consumer.