What PayPal does with your money

[Capper]

(FORTUNE Small Business) -- Next month, eBay (EBAY, Fortune 500) intends to implement a controversial new policy that will entail holding payments sent through PayPal for up to 21 days for certain "high-risk transactions."
Furious at the prospect of waiting to receive funds, sellers have been publicly speculating about how much money PayPal (and its parent company, eBay) makes off the accruing interest on funds under PayPal's control - and whether a desire to retain those funds for longer spurred eBay's holding plan.
However, company executives and industry analysts say the money PayPal makes off such payments has a negligible impact on its bottom line.
Any funds PayPal holds for dispersal are automatically deposited in a corporate bank account, which earns interest, according to Paypal representative Amanda Pires. The money is kept there until it's ready for distribution. PayPal, which processes payments for eBay auctions as well as e-commerce transactions from elsewhere on the Internet, counts interest payments on those funds as one of its revenue streams.
That's a perfectly legal practice, as PayPal is classified as a deposit broker, according to Federal Deposit Insurance Corporation (FDIC) spokesman David Barr.
"Deposit brokers make money being deposit brokers," Barr said. "That's the reason they're in business. As long as fees are disclosed, that's fine from our standpoint."
Indeed, Paypal's user agreement - which all accountholders must read and accept - states: "Paypal may combine your funds with the funds of other Users and place those Pooled Accounts in one or more bank accounts in PayPal's name."
This applies to any user funds that are in the company's "custody." The agreement further states that accountholders "irrevocably transfer and assign to PayPal any ownership right that you may have in any interest" that accrues in these accounts.

What PayPal does with your money

[halutzparilla]

of all terms and condition / user agreement only paypal i read and used paypal only for a couple of times. and yeah i'm well aware of the crap deposit broker thing that they get money by pooling all their costumers money and deposited in a commercial bank with the highest interest...

[azianai]

isn't this the same way with companies and rebates?

[drew and not u]

Although all my experiences have been smooth on ebay/paypal, I hate them both. Their policies have gotten continuously more jacked up since I signed up originally. I'm pretty much done with ebay and I'm going to try out onlineauctions.com and see how that works out.

[onebxr]

I REFUSE to use paypal! If I cant pay for it without using that shit service I will not buy the product.
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[screwballl]

in my case since I do not have a credit card, I have to rely on them for some things. I keep my account with only $1-2 in it normally... if I need something like from Newegg, I just transfer the cash from my bank account, 3 days later when it is available I order and whatever is left over I transfer back into my bank account... of course as soon as the wife sees money in our bank account again she spends it before I even know its finished transferring... she still owes me $150 from a few weeks ago that I had originally received as a gift, not for her expenditures... pissed me right off

[Parker]

Originally Posted by screwballl

in my case since I do not have a credit card, I have to rely on them for some things. I keep my account with only $1-2 in it normally... if I need something like from Newegg, I just transfer the cash from my bank account, 3 days later when it is available I order and whatever is left over I transfer back into my bank account...

I am constantly bringing money into the paypal account, because I sell stuff on ebay.
My dad doesn't like to keep money in paypal though. So he takes it out.
It's not really a problem either.

[Capper]

I've used Payl Pal for 8 years now and have had three very big issues. All three they did nothing and blew off every attempt to make things right.

I still use PayPal for HL (Donations and things like the game server)......with small things like this I've never had a problem....but when it comes to high value items, I'll never recommend PayPal or FleaBay.

[onebxr]

PAYPAL!
^this is why i dont like paypal.^
PayPalSucks.com is where you will learn about the PayPal Class Action Lawsuit, Abuse, Fraud & evil behind the PayPal system!
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