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A PayPal Primer

Understanding eBay's preferred payment system

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A PayPal Primer

When you see the PayPal logo in a listing, you know precisely how to pay.

One of the first things you'll notice when you begin to use eBay as a new user is the pravalence of a payment system called PayPal. A majority of auction listings on the eBay website list PayPal as a payment option (along with a set of credit card icons), and when you buy you'll often be asked if you'd like to join PayPal in order to pay for your item.

So what is PayPal?

PayPal is an online payment system that facilitates the exchange of money between eBay traders. PayPal is owned by eBay, and a majority of eBay members are also PayPal members. When you join PayPal, you are given a PayPal "account" that can hold money, similar in some ways to (though very different in other ways from) a bank account. As a PayPal member, you are able to:

  • Transfer money from your bank account to your PayPal account
  • Get a cash advance from your credit card and deposit the amount in your PayPal account
  • Transfer money from your own PayPal account to another member's PayPal account
  • Transfer money from your PayPal account to your checking or savings account
  • Have a check mailed to you for the balance of your PayPal account
  • Get a PayPal debit card that you can use to make real-world purchases from your PayPal account

Given this dizzying list of features, it's instructive to note that PayPal is most often used for simple auction payments, with the process looking something like this:

  1. Bidder wins auction. A bidder bids on, and wins, an auction from a seller that accepts PayPal as a payment method.

  2. Winning bidder checks out using PayPal. From the My eBay page, the winning bidder, who is a member of PayPal, clicks on the "Pay Now" icon next to the completed auction.

  3. Money is moved automatically. By checking out using PayPal, the winning bidder automatically triggers a transfer of funds from his or her preferred payment method (either credit card or bank account) into his or her PayPal account. These funds are then immediately transferred to the seller's PayPal account.

  4. Seller receives funds. With the funds now in his or her account, the seller is now free to either transfer them to his or her bank account(s), have a check mailed from PayPal, spend them in the "real" world using a PayPal debit card, or use the PayPal balance to make other purchases on eBay.

Though it may sound complicated at first, you'll find that in practice, this process is about as painless as an online payment system could conceivably be. It is repeated hundreds of thousands, if not millions of times every day on eBay's website.

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