How Does PayPal Work?

How Does PayPal Work?

Service based monetary transactions from abroad used to be a bit problematic about a decade ago. But now PayPal has made our lives easier. There are other alike services also, but PayPal is, past doubt, the most popular among them all. Peter Thiel’s PayPal is a package that lets national and international money transactions through internet. The entire system of PayPal is based on email ID. So, one can say, one email ID pays money to another email ID.

Peter Thiel: Innovator of PayPal

What is PayPal?

It is an online financial service that lets you to pay for items using a secure internet account. All you need to do is link your bank account, credit card or debit card details and now each time you wish to pay using PayPal, you can select which of your cards or accounts it pays with. You can also receive money through the facility. The money received stays in your PayPal account and can be used when paying for something. You can transfer the money to one of your assigned bank accounts or cards also if you require to do so.


PayPal breakdowns type of payments into categories based on what you’re paying for. You can pay for nearly anything in the world on the PayPal system.


  • Instant transfer: Sending money by this method means the money is instantly credited to the recipient’s account which means the person can then instantly transfer the money to his or her personal bank account. If you wish to send a transfer, you must have a credit or debit card registered with PayPal as a backup for your funds. 
  • Electronic Check: This method is not as instant as an previous method. It’s like writing a check from your checking account. It can take from three to five days for an eCheck to clear.
  • PayPal balance: If you receive money from someone through PayPal or you have sold something on eBay, you have a balance in your PayPal account.
  • Credit card: Pushing your PayPal purchases on a credit card is also a feature of PayPal. PayPal not only keeps you secure, but your credit card company also backs you up in case of a scam.

You can send money from PayPal in the following ways:

  • Paying for eBay items: For buying an eBay item on eBay, you need to pay through the eBay Checkout system and you can do so by using PayPal.
  • Goods (other): By clicking this button, you can send money to anyone in the world for things bought anywhere but eBay.
  • Services: You can send payment for a service performed for you or your business, such as web design etc.
  • Personal: This can be used when you need to send money to your personal contact people or others, if required.

More technically, When PayPal links to a bank account for either payments or credits, it uses an electronic interface functioned by the Federal Reserve; this interface is called the automated clearing house. When a transaction is initiated by PayPal, it assumes the role of making depository financial institution in the ACH transaction. It sends an electronic request for funds or notice of deposit through the ACH system to the user’s bank, and the linked bank account replies with approval. Funds transferred through the ACH take 3-5 business days to settle down.

How do I get it functioning?

First step is to register yourself –

To use PayPal, you need to have a valid email ID and a credit card, say bank account.

The second step being verifying your bank account –

To verify that you have entered the correct bank account details, PayPal will transfer one or two very small amounts of money in your account. Once you receive these amounts, you must go back to your PayPal profile and enter the amount you have received.

Now you can make payments or receive money via PayPal.

PayPal Working
PayPal Login

PayPal Fee –

PayPal incurs the transaction fee for funds transfer.  Suppose the payee is to pay this fee then for a payment of $100 you can send $100 and the payee will get $96.6. The remaining amount is incurred in the form of PayPal transaction fee. But if you’re supposed to pay the fee, then you should transfer the payment amount in addition with the PayPal fee.

There are devoted PayPal apps for iPhone and Android devices having features such as one Touch Payment. Thus, in this busy world, the PayPal working helps us to handle our financial matters efficiently.

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