PayPal dominates the digital payment scene. It has upwards of 360 million active users in more than 200 countries and facilitated four billion payment transactions in Q3 of 2020 alone.

Since 1998, PayPal has been giving consumers alternative ways to make purchases and send and receive money online. PayPal lets you pay for things online with a bank account instead of a credit card and keeps your payment information hidden from merchants. It also makes sending money easy and, in most cases, free. PayPal has essentially made checks and costly wire transfer services obsolete.

Decades since its founding, PayPal remains a top choice for online shopping and money transfers. Here’s what you need to know to get started with PayPal.

What is PayPal and how does it work?

PayPal is an online payment system that makes paying for things online and sending and receiving money safe and secure.

When you link your bank account, credit card or debit card to your PayPal account, you can use PayPal to make purchases online with participating stores. PayPal serves as a middleman between your bank and merchants and keeps your payment information secure.

You can also use PayPal to securely send money to friends and family as well as receive money from people. This feature is useful for splitting rent with roommates, for example, or receiving money for your birthday.

What is PayPal Credit?

PayPal Credit is PayPal’s credit line program. It’s like a virtual credit card, but it can only be used to make online payments on websites that accept PayPal. Just like a traditional credit card, PayPal Credit lets you defer payments.

What is PayPal Pay in 4?

PayPal also offers a buy now, pay later program called Pay in 4, which lets users split up purchases into four equal payments over six weeks. There is no interest or fees associated with this program, and you can pay off purchases between $30 and $1,500.

Why use PayPal?

Secure transactions

When you use your debit or credit card to pay for things online, merchants can sometimes access your payment information. PayPal provides an extra layer of protection by ensuring that merchants never see your sensitive data. PayPal also uses a number of features to keep accounts secure, including end-to-end data encryption, optional two-factor account logins and email confirmations for transactions.

Easy and convenient

PayPal is now the fifth most accepted payment option after Visa, Mastercard, American Express and Discover and is available at millions of stores online. Have you ever wanted to make an online purchase but couldn’t because you didn’t have your credit card handy? You can use PayPal to make a payment via cards that are linked to your account, without having to retype your card numbers. All you need to do to make a purchase via PayPal is memorize (or save) your PayPal login information.

Is PayPal free to use?

Creating a PayPal account is free and online purchases and most personal transactions are also free. PayPal does, however, charge fees for certain types of transactions.

Fees for purchases

There are no fees for making purchases online with retailers that accept PayPal as long as there’s no currency conversion involved. There is a 3 percent or 4 percent foreign transaction fee for purchases made in a foreign currency.

Fees for personal transactions

When you send money to or receive money from friends and family for personal reasons, and not for any sort of commercial reason, PayPal considers this a personal transaction. PayPal has a special “Friends and Family” tab you can click when making personal transactions. Some of these transactions attract fees while others don’t, mostly based on where you’re drawing the funds from and where you’re sending them.

If you use your PayPal balance, bank account, or Amex Send™ Account, there is no fee for a domestic personal transaction and a 5 percent fee (between $0.99 and $4.99 USD) for an international transaction. If you send money using a debit or credit card, you’ll be charged 2.9 percent if it’s domestic and 5 percent if it’s international, plus a fixed fee that varies depending on your country ($0.30 USD for payments originating in the U.S.).

Is there a fee to receive money through PayPal? Generally speaking, no. It’s free to receive money from a friend through PayPal as long as there’s no currency conversion involved.

Fees for withdrawing money

There are some other fees you might encounter when using PayPal. While there’s no fee to transfer your PayPal account balance to a local account, you’ll have to wait for the funds to go through. If you want instant access, you’ll have to pay a 1 percent fee. In addition, drawing a check from your PayPal account comes with a $1.50 fee per withdrawal.

How to make a PayPal account

Before you open a PayPal account, you need to decide what kind of account you want. PayPal offers two types of accounts: personal and business.

Personal PayPal accounts

A personal PayPal account is the most common account for individual use. It’s all you’ll need to send and receive money or to use PayPal to make purchases online. This account also lets you access your purchase history, link new bank accounts and add credit cards to your account.

Business PayPal accounts

PayPal also offers accounts that allow businesses to accept PayPal payments online as well as credit cards and debit cards online or in person, even if your customers don’t have PayPal accounts. Service-based businesses and professionals can also send invoices to clients and receive PayPal online payments securely.

How to create a PayPal account

You can create a PayPal account from your computer or mobile browser or directly through the PayPal app. Here are the steps you’ll need to follow:

  1. Go to or download the PayPal app from the App Store or Google Play.
  2. Click the blue “Sign Up” button.
  3. Select “Personal Account.”
  4. Add your phone number and you’ll receive a text with a security code to enter on the next screen.
  5. Enter your legal first and last name, email address and a secure password.
  6. Then, enter your mailing address and agree to PayPal’s privacy policy. This will create your account.
  7. Finally, add a credit card, debit card, or bank account to your PayPal account.

How to send money via PayPal

There are several ways to send money via PayPal. The method you choose depends on who you’re sending money to, for what reason and what medium you want to use.

How to send money via PayPal to friends and family

Whether you want to send money to a roommate for your share of the rent or shower your niece with cash on her birthday, follow these instructions for paying friends and family via PayPal:

  1. From the PayPal app or your online PayPal account, hit the “Send” button.
  2. Enter the name, email address or phone number of the person you want to send money to. You can also scan your friend’s PayPal QR code for a quick start. If the person doesn’t already have a PayPal account, they’ll be able to claim the money by making a free account.
  3. Enter the amount you want to send. You have the option to add a message, which could be a useful reminder to you and the recipient what the money’s for. For example, you could enter “July rent” or “Happy birthday, Georgia!”
  4. You’ll be asked what your PayPal online payment is for: “Friends and Family” or “Goods and Services.” The latter triggers a fee that the receiving account has to pay, so make sure you select the right option.

How to send money via PayPal for products and services

Let’s say you hire a landscaper to mow your lawn and you want to use PayPal to pay the bill, or you run out of cash at a flea market and want to buy something from a vendor who accepts PayPal. This is how to send money for products and services via PayPal:

  1. If the vendor has a QR code, hit “Scan/Pay” in the app to get started.
  2. Otherwise, from the PayPal app or your online PayPal account, hit the “Send” button. Then enter the name, email address or phone number of the person you want to send money to.
  3. Enter the amount you want to send. You can add a note (e.g., “Lawn mowing” or “Antique dresser”) to remind the merchant and yourself what the payment is for.
  4. PayPal will ask you whether you’re sending money to “Friends and Family” or paying for “Goods and Services.”

Getting paid through PayPal

Whether you’re wondering how to receive money on PayPal from a friend, how to receive PayPal payments from customers or how to create an invoice on PayPal, getting paid through PayPal is simple. Keep in mind that there are different merchant fees involved with some payment options. So make sure you understand the best choice for your situation.

  1. From the PayPal app or your online PayPal account, hit the “Request” button.
  2. From here you can choose from the following options:
    • Enter the email or mobile number of the person paying you
    • Create a PayPal.Me link to share
    • Split a bill
    • Create an invoice
  3. Your friend can also initiate a payment through PayPal to send you money by entering your email or mobile number.
  4. When someone sends you money, you’ll receive a notification via email and/or the PayPal app. The money is deposited into your PayPal account.
  5. You can keep the money in your PayPal account to apply it toward future transactions or transfer it to your bank account.

Alternatives to PayPal


Venmo is a convenient mobile app that doesn’t charge transaction fees when you request money. The company makes money by charging fees for sending money via credit card and for instant transfers. Standard transfers are free. Venmo has a unique social networking feature.

Cash App

Cash App enables people to send money and make online and in-store purchases from their phone. You can load your Cash App with funds from a bank account, debit card or credit card. If you don’t have a bank account, you can sign up for the Cash Card debit card, which is tied to your app’s balance. You can use the debit card, or its e-wallet version, wherever Visa is accepted.


Just like its competitors, Skrill lets its users easily send money. Its biggest differentiator is that the tool doesn’t charge foreign transaction fees to send money abroad from the United States. Just make sure to use your account regularly to avoid a $5 inactivity fee. Skrill offers its users The Skrill Visa® Prepaid Card with an e-wallet option. The card has a loyalty program that lets you earn rewards for every purchase.