What is PayPal and how does it work?

PayPal has been in the mobile payments business for more than a decade. It’s been around even longer as an online financial service, but mobile is the area that seems to be growing fastest.

 

Most recently, an agreement with Apple enables iOS device owners to use PayPal across iTunes, the App Store and other Apple online services.

 

So it’s an ideal time to have a look at what mobile services PayPal offers to give you an indication of what you can do with the PayPal apps and features should you choose to sign up for an account.

What is PayPal?

PayPal is an online financial service that allows you to pay for items using a secure internet account. You simply add your bank account, credit card or debit card details and whenever you pay using PayPal, you can can choose which of your cards or accounts it pays with. You can also set one to be the default payment method and that will be used unless you choose otherwise.

 

You can pay for items from a vast number of online and high street stores, including restaurants, petrol stations and market traders.

 

In addition to paying for items using PayPal, you can also receive money through the service. Any money received sits in your PayPal account and can be used when paying for something, with the balance topped up by your assigned cards or bank account.

 

Alternatively, you can transfer the money to one of your assigned bank accounts or cards.

 

There can be fee applied when you receive money to your PayPal account. For example, if you sell an item on eBay. However, the vast majority of uses are completely free to you on a personal basis. It is free to transfer money to friends or family through PayPal accounts, as long as there is no currency conversion required.

 

There are business PayPal accounts available too, which you can find out more about here.

 

 

What is PayPal Credit?

Last year PayPal started its own credit service, where you can pay for items using PayPal but pay from them later. It’s a lot like a credit card although you don’t require an actual card. It currently charges a (variable) purchase interest rate of 17.9 per cent per annum but as an incentive, you get 0 per cent interest on purchases of over £150 for four months. So if you pay it back within that time, it won’t cost you more than the original purchase price.

 

Some stores offer special deals when paying for products using PayPal Credit, with reduced interest rates depending on the retailer.

 

PayPal takes on Visa and Mastercard with PayPal Credit, and interest starts at 0 per cent

Why use PayPal?

While there are plenty of online payment systems these days, and several manufacturer or network digital wallets, PayPal offers a few additional benefits that others might not.

 

To begin with, its age means it is well established and widely accepted. You will find a “pay by PayPal” option on thousands of websites that do not offer the same for Apple Pay or other digital financial services.

 

Its buyer protection safeguards will also ensure you get a refund if an item you buy online doesn’t arrive or doesn’t match a seller’s description. This is especially useful when purchasing items on eBay, where you do not usually have shop guarantees.

 

Those selling items on a personal or business level and are paid through PayPal are also protected. For example, if you can provide proof that you sent an item by post yet the buyer claims not to have received it, you get to keep the full payment.

 

Another reason to use PayPal is that it offers an additional layer of security to payments. As you do not have to enter your card details or CCV number each time you purchase something, just your PayPal log in and password or mobile number and PIN, the online store does not have your details in its database.

 

In some occasions you can also use OneTouch payments, where PayPal keeps you logged in if you activate the service and you do not have to enter your details each time you purchase something, no matter which store. That’s because it is specific to a device and browser. For example, if you enable OneTouch on your PC, it will only work when you use that specific computer and the same browser.

 

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Does PayPal cost me anything?

As we’ve said above, it is mostly free to use PayPal. It is certainly free to sign up for an account, even if you do not use it often. You are never charged for a purchase in the same currency – only occasionally when there is an exchange rate to be considered. This is essentially the same as with your bank.

 

You will occasionally incur fees if you sell items and receive payment through PayPal. And business accounts can have different fees levied depending on the circumstances – such as accepting credit card payments through a PayPal Here Chip and PIN/contactless payment reader.

 

How do I get a PayPal account?

It’s easy to sign up for a PayPal account. You head to PayPal.com and click the “Sign Up” button. It’ll ask if you want to sign up for a personal or business account and away you go. Don’t forget to have your bank, credit or debit card details to hand though.

How to pay with PayPal?

PayPal works online and in stores through a browser or mobile application. There are dedicated apps for Android and iOS.

When paying online, you just need to look for the PayPal symbol and check out by following the simple instructions on screen. The apps do more though.

Thanks to many partnerships with stores and restaurants in your area, you get different options of how to pay for products, food or petrol, even order ahead to beat the queues in some food establishments and coffee shops. The app shows you a list of all the vendors nearby that accept each of the different PayPal options.

 

You can also add loyalty cards to your PayPal account, in order to gain loyalty points whenever you pay for something using the app.

 

Where can I use PayPal?

As there are thousands of PayPal-enabled vendors, here are just some of the places it is accepted in the UK, both online or in store:

  • Apple (iTunes, App Store, etc)
  • Argos
  • Asos
  • Barbour
  • Ben Sherman
  • Boots
  • British Airways
  • Disney Store
  • Domino’s
  • eBay
  • ebuyer.com
  • Gourmet Burger Kitchen
  • Groupon
  • Halfords
  • HungryHouse
  • John Lewis
  • Maplin
  • New Look
  • Nike
  • Oasis
  • Pizza Express
  • Pizza Hut
  • PlayStation Store
  • Poundland
  • Royal Mail
  • Samsung eStore
  • Shell
  • Sports Direct
  • Spotify
  • Steam
  • Superdrug
  • TopShop
  • Toys R’ Us
  • Wagamama
  • Xbox
  • Zara

Is PayPal available for my phone?

As we explained above, there are dedicated PayPal apps for iPhone and Android devices.

The iPhone app requires iOS 8.1 or greater. It will also work with iPod touch and iPad devices.

The Android app varies by device, so it is best to download and try to install it before you sign up for an account to ensure it works with your phone.

Computer users can sign into PayPal through any regular browser. Online stores will direct you to a sign-in page whenever you want to pay using your account.

If you have OneTouch enabled, on something like Steam, for example, you need only click on the pay by PayPal option and the rest is done for you.

 

How to use PayPal

PayPal is a way to send and receive money online. You can use PayPal to shop on thousands of websites, or to send money quickly to anyone with an email address. In this guide, we’re going to show you how to set up a PayPal account that can be used to buy or sell online, when using eBay and other online shopping websites.

You’ll need:

  • a computer with an internet connection
  • a bank account and/or credit/debit card.

Follow these step-by-step instructions to learn how to use PayPal

Step 1: Go to the PayPal website and click Sign Up.

Step 2: A new page will open with an option to choose between a ‘Personal’ or ‘Business’ account. A Personal account is all you need for buying online. Select the type of account and then click Continue.

Step 3: You now have to fill in your name, email address, plus a password. When you have added your details, click Next.

Step 4: Next you will be asked to complete your address details. This will also be your billing address and may also be the address you will want items to be delivered to (although it does not have to be if you are buying something as a gift). Once you have completed this click in the second box to confirm that you have read and understood the user agreement.

 

Please note the top box should only be ticked if you are on a computer in your own home and are completely confident that no-one would be able to access your account. If you have any doubts then leave it empty.

Click on Agree and Create Account

Step 5:  A new window will open giving you two options. The first choice is to start shopping with retailers who accept PayPal. The second is to send money to someone.

In this example we are concentrating on buying online using PayPal so click on Get Started.

Step 6: In the next window you can add your credit or debit card.

Step 7: When shopping or even donating to a charity online, you can use PayPal whenever you see their logo. All you need to do is enter your email address and password to make a payment.

Using PayPal means that you do not share any of your bank details with the seller – the only information they get is from PayPal. Payments are instant so there is no more waiting for goods to be despatched once a cheque has cleared banking.

PayPal also automatically offer PayPal Buyer Protection which means you can make a claim to get your money back if goods you’ve paid for don’t turn up or they’re not as the seller described when they arrive.

Step 8: If you’re selling something online using PayPal, you’ll also need your email address and password. See our guide How to sell on eBay for information in this.

Once a payment has been made to your PayPal account, PayPal will email you a receipt. Return to the PayPal website and log in using your email address and password. You’ll see that you’ve been credited with the total amount minus PayPal’s transaction fee.

Step 9: To transfer the payment to your bank account, click Transfer Money. If you haven’t already added your bank account details click on More.

Step 10: If you have clicked More you will see this window. Here you can check which bank account is allocated for transfers or add another account.

We hope this guide has helped you learn how to use Paypal to transfer money to friends and family. You can also send money across Skype check out our guide here.