Hi! I am a bit confused about how PayPal works with banks and credit cards. It seems like they are involved with everything! Also, why isn’t my money in PayPal insured by the FDIC, unlike my bank account? Basically, I’d love a super simple explanation of the whole payment thing!
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I think PayPal has several ways in which it works.
The first one is quite obvious, it is a money-goods/services exchange interface.
Secondly, PayPal is more of an escrow account. At least that’s how it works, you can choose to delay a payment until your goods have been delivered or a service has been performed.
So basically, since it is a money exchange system you do not gain any interest from depositing in PayPal. And unlike Banks, since PayPal does not hold money as deposits, the money can’t be insured by the FDIC
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Your balance is not protected in the event that PayPal or you personally experience a hack. You can have government-insured bank accounts with balances up to $50,000 (at least where I live). You shouldn’t store a lot of money on your PayPal account because of this.
To the best of my knowledge, there is no connection between PayPal and banks. When you contribute to your balance, PayPal appears to your bank as just another company that you are paying. Once the money leaves the bank account, they are not involved in the transaction at all.
It’s really a simple method of making online payments without jeopardizing the security of your credit card information.
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Hi, PayPal is an internet payment gateway that enables electronic money transfers for both people and companies. By serving as a middleman between buyers and sellers and offering a safe platform for money transfers, PayPal streamlines online transactions.
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PayPal acts as an intermediary between individuals and businesses. Transactions are quite safe because you never give anyone your banking information, such as your account number. People are typically hesitant to enter their credit card information, especially when dealing with new or small firms.
The FDIC thing means that if you or PayPal are hacked, your balance is not protected. With your bank account, balances up to $50,000 (at least where I live) are insured by the government. That is why you should limit the amount of money you retain on PayPal.
As far as I am aware, there is no interaction between PayPal and banks. PayPal is simply a firm that you pay (when you add to your balance). They have nothing to do with the transaction when the money leaves the bank account.
It’s simply a quick and secure way to pay online.
For your question on why funds held in PayPal accounts are not insured by the FDIC, it is important to note that PayPal is not a bank; it’s a payment processor and does not operate under the same regulatory framework as banks.
As a payment processor, you can link your PayPal account to your bank account, debit card, or credit card. When you make a payment using PayPal, it can draw funds from these linked sources.
The relationship between PayPal and credit card linkage is simple. Linking a credit card to PayPal enables you to make payments using your credit card through PayPal. PayPal processes the payment, and the charge appears on your credit card statement.