How Does PayPal Work? What are the Pros and Cons of Using PayPal?

Today, PayPal is known as a pioneer in the online merchant services sector. It enables you to quickly and efficiently transfer money to a person or business.

Founded in 1998, PayPal has become a global ecommerce business.

The company was founded by a team of five: Luke Nosek, Ken Howery, Elon Musk (went on to start Tesla Motors), Peter Thiel, and Max Levchin. Since its launch, PayPal has experienced a tremendous level of growth.

On October 3rd, 2002, eBay purchased PayPal, a mere 4 years after it was created.

Paypal Reviews - Get Paid with Paypal

PayPal Reviews and Detailed Analysis

  1. Services – How Does PayPal Work
  2. PayPal For Businesses
  3. PayPal For Consumers
  4. Rates and Fees
  5. PayPal Tools
  6. Consumer Complaints
  7. Conclusion

Services – How Does PayPal Work

In its most basic form, PayPal works as a platform that allows easy transferring of money from one person or entity to another.

You can use PayPal to request payment for virtual products or services, send money as payment to contractors, and much more as a business.

As a consumer, you can use PayPal to purchase products more securely online and send money to a friend, no matter where they are in the world.

You can even use it as a bank account by applying for the PayPal debit card.

                                         PayPal. How does Paypal Work. What are the rates for Paypal

PayPal for Businesses

PayPal is considered the world’s most trusted online merchant account.

When consumers see the “PayPal Verified” stamp on a website, they normally feel more comfortable about the security of the site’s payment platform and are more likely to make purchases.

This added trust can do quite a bit to increase your sales.

PayPal for Consumers

The first and most important benefit is that PayPal offers unmatched security for your purchases. Also, for just about anything a consumer would want to do with their PayPal account, the services are free.

In addition, there are a whole lot of websites that allow you to make a purchase using PayPal. Instead of using a credit card (and worrying about fraudulent security issues) you can just use PayPal to make the purchase.

PayPal effectively enables you to make online purchases from even the smallest merchants with security and peace of mind.

Your personal and financial information is never exposed online or shared with the businesses you purchase from.

Want to transfer money? Send it through PayPal to another user for free. Want to withdraw money that’s sent to you? There’s a free PayPal tool for that.

It’s actually hard to find a service designed for consumers on PayPal that’s not free

how does paypal work, what is paypal and how do you get a paypal account
Shopping with PayPal

PayPal Rates and Fees

As mentioned above, PayPal services are virtually free for consumers.

PayPal does make money, however, and they do that mostly with the services offered to businesses and website owners.

Business owners do not have to pay monthly fees or setup fees. All they pay is a percentage of each transaction. And even that looks to be very competitive, currently at 2.2% to 2.9% plus a $.30 transaction fee.

If you’ve been doing business online, you’ll realize that this is an incredibly competitive rate and much lower than charged by other payment transfer providers.

Below is a screenshot of PayPal’s payment features.

PayPal Reviews - Payment Features

PayPal Tools

PayPal offers a great list of tools for both consumers and businesses.

Why do Businesses use PayPal Tools?

  • PayPal Verified Stamp – As mentioned above, one of our favorite tools is the PayPal Verified stamp. When consumers see this on your website, they feel more comfortable trusting your website.
  • Send Invoices – Are you an online freelancer without a website? Want a way to accept payment other than waiting for a check to arrive in the mail? PayPal gives you the ability to send invoices through email!
  • Charge All Major Credit Cards – Using the PayPal merchant account, you’ll be able to charge Visa, MasterCard, Discover, American Express, and more!
  • Detailed Tracking of Sales: Sales tracking is incredibly important for any business. Using this platform, you’ll have no problem at all tracking your purchases from day 1.

Why do Consumers use PayPal Tools?

  • Security Features – As mentioned above, PayPal provides an incredibly secure way to pay. If you’re not typing your credit card number into forms online, you have much less of a chance of one of your credit card accounts being compromised.
  • PayPal Debit Card – If you’re tired of working with banks, but you like having a debit card, PayPal provides a great solution here. Being a Visa card, the PayPal card is accepted everywhere.

Consumer Complaints

That being said, PayPal has received its share of customer complaints and negative reviews. It is important to remember, however, that consumers are more likely to publicize their experience if they had a bad one than if they enjoyed their experience.

From our research, below are some of the top most common complaints posted by PayPal consumers.

  • Fraudulent emails (Not actually PayPal – the company has become so big that con artists make attempts to get your PayPal information by sending you fraudulent emails claiming to be PayPal.)
  • Extended withholding of funds
  • In the event of a dispute between buyer and seller, PayPal normally sides with the buyer


When you look at everything that is PayPal, it’s easy to see that they’re a great option for both consumers and businesses.

As a pioneer in the industry, they have some of the best tools that you could ask for at some of the best rates.

Overall, PayPal looks to be a really great option for buyers and sellers alike.