what is PayPal and how does it work? are some of the questions we ask ourselves when we first dive into this platform. Many of us have read the word PayPal at some point, but we may not remember how or why.
However, chances are you’ve seen the logo while shopping online. So what does PayPal have to do with online shopping? Here’s the answer.
Although if you just remembered that, during an online purchase you made a month ago, one of the payment options was PayPal, you can already get an idea of what it’s for. In fact, many companies and businesses use it to sell their goods and services online quickly and securely.
In this article, we will not only tell you how to use PayPal, but we will also solve the biggest doubts related to this popular payment platform.
read on and find out all about PayPal and much more!
what is PayPal and what is it for?
If you are wondering what is PayPal and what is its importance today, we tell you that PayPal is an electronic wallet that appeared in the life of digital users to meet a need that was born with e-commerce: to make secure payments online .
At the beginning, online shopping was not seen as safe. Scams were frequent, so many customers were afraid to buy online. Very few would dare to pay someone without the need to see them physically. The same was true of the products/services offered by companies on their websites.
But that changed little by little, with the arrival of PayPal and other similar payment systems. Today, PayPal is one of the most popular payment methods on the Internet. Companies large and small, such as Facebook, Spotify, Microsoft, Uber and Fortnite, accept payments via PayPal.
In fact, knowing what PayPal is is very important for every freelancer who wants to offer their services in a safe and comfortable way. In this regard, our teacher Laura Lopez Fernandez, from the online course of emprende como freelancer y consigue tus primeros clientes, mentions the following:
“It is worth paying a little more for electronic tools to keep a good control of your accounts. One of them is PayPal, which allows you to generate invoices in a matter of minutes and easily receive card or bank payments”.
how does PayPal work?
Okay, you know what PayPal is, now let’s see how it works. This payment system basically works as a bridge between a buyer and a seller. there are no limits! It can be used by independent merchants or businesses.
In addition, with PayPal you will be able to buy on the websites of your choice, without having to have your credit card at hand.
It’s as if you asked a person you trust to make a payment for you. This person will not only carry out the transaction, but will also keep all your financial information under seven keys.
Therefore, financial transactions via PayPal are characterized by being secure and quick to perform. This is the amazing thing about knowing what PayPal is and how it can make your life easier.
As Paypal mentions, why sell to 100 people if you can sell to over 200 million? Take a look at the following video, which explains the benefits of Paypal in more detail.
Of course, to make your transactions through this system, you will need to have one of these payment methods:
Credit or debit card
A PayPal account
A bank account
what’s next? You will need to create a PayPal account and associate a payment method to it. Here is a step-by-step guide on how to create a PayPal account.
how to create a PayPal account?
PayPal offers two types of accounts:
Business account: it is free and is intended for people who sell products or provide services through their website.
Personal account: it is free and is intended for users who make purchases and payments on the Internet.
If you want to create a PayPal business account, follow these steps:
1. Log in to the Paypal website, go to the “Business” section and choose “Sign up at no cost”.
2. Enter the email address you will use to log in to PayPal. Then, the system will send you a message to your email.
3. Enter your company and owner information.
4. Indicate the type of company (self-employed, partnership or company, etc). Each option will ask you for other information. For example, the url of your company website.
5. Now. you must confirm your account through your email.
6. Enter your email, find the email PayPal sent you and click on “Confirm email”.
7. Once you have confirmed your email, PayPal will take you to their website to set up your banking information.
8. Click on the nut on the top side and choose “Link and confirm credit or debit card”.
9. Now, you will have to enter your bank details, as well as select the type of card you will link to your account.
10. When you have finished filling in your details, click on “Continue”. And that’s it. Your PayPal business account is now ready for you to use.
On the other hand, if you want to create a personal PayPal account follow these steps:
1. Log in to the PayPal website, go to the “Personal” section and choose “Sign up for free”.
2. Fill in the form with your data: country/region, first name, last name, e-mail, create password, confirm password. Then click on “Continue”.
4. Here PayPal will give you three options to start using your account: buy with PayPal, send money or add a card for later use.
5. The next step is to set up your account.
6. Now it’s time to associate your bank details with your PayPal account. Select the “My wallet” tab and you will see two options: link bank account and link card. Choose the option of your choice and complete the requested data.
If you chose “Link Bank Account”, once you have completed your details, you will need to confirm your bank account. Click “Accept”.
PayPal will make two small deposits and ask you to verify them. You will then need to enter the exact amount in your PayPal account to confirm that you are the owner of that bank account.
To verify your PayPal account, you will have to wait a couple of days.
After this time, you will need to log in to your account and click on “Confirm bank account”. Here you will have to enter the amount of the small deposits PayPal made into your bank account and then click “Submit”. That’s it, your PayPal account has been verified, and you are ready to make purchases.
7. Confirm and verify your account. It is preferable to do it right away.
not clear on some of the steps? don’t worry, take a look at the following video to learn in depth how to create a business or personal PayPal account.
So far, knowing what PayPal is and how to create an account is simple, right? Let’s move on to the next point: PayPal fees.
does PayPal charge a fee for online purchases? You should know that PayPal does charge fees, but only in some cases. We tell you what they are and learn how to increase your sales with CRM.
For example, PayPal does not charge commissions when…
You open a PayPal account.
You make a money transfer from your bank account to your PayPal account.
You buy goods or services with your PayPal account.
You cancel your PayPal account.
On the other hand, it does apply fees when you…
You collect payments, either for products or services.
You accept payments from family and friends made with a credit/debit card.
You receive payments from people living in other countries.
how much are the commissions?
If you want to know the fees charged by PayPal, let’s take a look at the countries that make the most use of this payment platform.
The commission for receiving payments from Mexican users is 3.95 %, while the commission for receiving payments from accounts outside the country is 0.50 %.for more information, check the PayPal Mexico commissions section.
In Peru, the transaction fee is 5.4 % + 0.30 USD fixed fee. For more information, check the PayPal Peru fees section.
Similarly, in Colombia the transaction fee is 5.4 % + 0.30 USD fixed fee. For currency conversion, there is an additional 3.5% fee. See more at PayPal Colombia.
If you want to know how PayPal works in Argentina and what their fees are, we will tell you below. In the land of wine and tango, there is no fee for receiving payments between two accounts located in Argentina.
If it involves a currency conversion, for example, from dollars to pesos, there is a 4.5% fee. On the other hand, you are charged 3.5% when making a transfer between two of your own accounts, in different currencies. Learn more in the PayPal Argentina fees section.
what is PayPal Credit?
After knowing what PayPal is, let’s continue with other of its new star features. Since 2019, PayPal started its own credit service called “PayPal Credit”, with which you can buy products and then pay for them. It is very similar to a credit card; but in this case you don’t have a physical card, only a virtual one.
Currently, it charges a purchase interest rate of 17.9% per year; but as an incentive, you can get 0% interest on purchases over $99 for 6 months. This means that if you pay on Paypal early, you will only be charged the original purchase price.
There are some companies that offer special offers if you make your purchases with Paypal, so always check the commercial alliances to make sure you get the best discounts.
how about taking advantage of PayPal to create irresistible promotions for your customers? Increase your sales with these frequent customer card templates. download them for free!
what credit cards does PayPal accept?
When you find out what PayPal is and how to use it, you’ll also need to check out how to make online transactions. What you may not know is that PayPal accepts Visa, MasterCard and American Express credit cards to make or send payments.
Just keep these points in mind to open your Paypal account and use your credit card:
Have at least $1.00 USD balance.
Be enabled for international online payments.
Have the card’s security code.
The billing address must match the billing address you entered in PayPal.
Some cards such as VISA or Mastercard and those with “electronic use only” are not compatible with the PayPal platform.
how to associate a credit card with PayPal?
To associate your credit card with PayPal, you only need to follow these simple steps:
Click on the Wallet option, which is located at the top of the PayPal page.
Then click on “Associate a card”.
Finally, link your card information and click on “Associate card”.
how to create a PayPal account without a credit card?
As we mentioned earlier, PayPal offers a special type of account for business owners that allows them to send invoices to customers and accept payments on their website.
You do not need to provide your credit card number to sign up for a standard business account. PayPal does ask you to verify your business account by linking it with your bank account information.
Here is a step-by-step video on how to create a PayPal account without a credit card.
what can I do with PayPal without a credit card?
Although you may have limitations as to what PayPal is without a bank or an integrated credit card, there is still a lot that this payment platform has to offer you.
In that sense, there are several actions you can do on PayPal without a credit card. One of the easiest and most unique ways to accumulate balance instead of having a registered card is to request and receive money from other PayPal users, although this will require a linked bank account (which can be a debit card). Similarly, you can also send any amount not exceeding your PayPal balance to others.
how do I cancel a PayPal account safely?
If you sell or buy products for your online business, you know how convenient PayPal is for sending and receiving money. PayPal has many benefits, but the high transaction fees for receiving funds in a merchant account can reduce your profits.
If you have found another payment service that better suits your needs, you can withdraw your funds from PayPal and close your account. However, once you close a PayPal account, you will not be able to reopen it.
Here are the steps to cancel your PayPal account:
Open your web browser and go to the PayPal website. Next, enter your PayPal email address and password at the top of the page, then click “Log in”.
Click “Withdraw” at the top of the page, then click “Transfer to Bank Account”.
Enter your entire PayPal balance in the Amount box. Click on the drop-down menu and select the bank account you want to send the money to. Click “Continue” and “Send”.
Next, go to “Go to my account” on the confirmation page and click on “Profile” at the top of the PayPal page.
Click on “My Settings. Click on the Account Type section, click on “Close Account” and “Continue”.
Select up to three reasons why you want to close your account, then click “Continue”.
Finally, click “Close Account” on the final confirmation screen to permanently close your PayPal account.
Advantages and disadvantages of creating a PayPal account
If you have a business and have been looking for the best online methods to receive online payments for your products and services, then it is vital that you know the advantages and disadvantages of creating a PayPal account for your business.
According to Paypal, they have more than 325 million active accounts in 200 markets and more than 200 currencies worldwide. However, despite being a very popular account worldwide, creating a Paypal account is not the perfect solution for all small businesses.
but don’t worry! Here are the advantages and disadvantages of using PayPal as your main online payment system for your business.
Advantages of creating a PayPal account
Here are the advantages of creating and using a PayPal account for your business.
It is easy to set up and use.
It is quite likely that your future customers will be familiar with this online payment system.
You do not need to have a merchant account to receive PayPal payments.
Your customers do not need to create a PayPal account to make payments.
You can create and send invoices through your account.
PayPal’ s fees and commissions are lower than many online merchant accounts (currently 2.9% + $0.30 USD for debit and credit card purchases).
You can set up recurring payments.
It is possible to integrate PayPal with various shopping cart systems (different e-commerce).
The most important thing: it is secure.
Disadvantages of having a PayPal account
There are some disadvantages to having a PayPal account that you should consider before choosing your primary payment system.
There are high fees for chargebacks.
It is limited in terms of usability and is subject to account suspension at any time, which unfortunately can result in your funds being frozen for months.
There are some users who are not interested in using PayPal, which may result in the loss of some customers. The best solution is to have additional payment system alternatives.
Sometimes it can be difficult to contact PayPal customer support.
Finally, the decision to open a PayPal account as your main online payment processor is important and can affect your business.
Therefore, it is always good to explore other alternatives to PayPal so you can make a decision that will benefit your business and choose the best landing page for your business.
Alternatives to PayPal
We have taken the liberty of putting together a short list with 3 alternatives to PayPal so you can compare them and use the one that suits you best. let’s explore them!
1. Apple Pay
If you’re an Apple lover, you can use Apple Pay to process digital payments to your friends, family and even merchants.
To use this alternative to PayPal, you just need to link it with your bank accounts, as well as credit or debit cards. The app can be used from an iPhone or Apple Watch to make purchases at any merchant with a contactless card reader.
2. Google Pay
Google Pay is like Apple Pay; but for Android users. You just need to link a bank account, debit or credit card. Just like that, this alternative to PayPal allows users to make purchases online or in a store.
Venmo is a payments company owned by Paypal, which is specialized in making smaller payments between friends and family.
In July 2020, Venmo incorporated a pilot test of new tools for sole proprietors with the creation of merchant profiles. These accounts offer contactless payments via a QR code.
Now you know what PayPal is and everything it allows you to do, from buying items on your favorite websites securely to sending and receiving payments anytime, anywhere. Today many businesses use it to sell to more people.
If you’re just starting out, the trade-off can be worth it. As your small business grows, you can continue to benefit from all of PayPal’s features and find that it’s a good fit for your business model.