To get started with PayPal, you'll have to hand over the usual registration info--your name, mailing and e-mail addresses--plus a bank savings or checking account number or your credit card information from MasterCard, Visa, Discover, or American Express. PayPal's safeguards have improved over the years. Money in your PayPal account is FDIC insured, so you can dispute credit card charges, which merchants refer to as charge-backs, when you don't receive purchased goods. PayPal also provides a buyer-complaint form for disputes with sellers. As long as you notify the company of any unauthorized use or access to your account, PayPal will investigate unauthorized withdrawals of more than $50 from your linked checking or savings account. Google Checkout allows you to get refunds for fraudulent charges as well.
If you set up your PayPal account so that funds move in and out of a bank account, you'll have to wait as long as a week for PayPal to verify your account, which it does by making a pair of small deposits. If you need to use the service ASAP, you'll have to arrange for it to withdraw money from a credit card account instead.
PayPal's interface is the model of clarity. Your account balance and recent transactions are on the first page of the site, and tabs along the top take you straight to the service's Send Money, Request Money, Merchant Tools, and Auction Tools sections. To send money, PayPal walks you through the entire process with wizardlike guides.
We find PayPal's array of account types to be confusing. If you sign up with the free Personal account, for instance, you can receive payments drafted from only a sender's checking or savings account, not a credit card. In order to receive credit-card-funded payments, you'll have to upgrade to a Premier or Business account. There's no monthly charge for either, but each payment you receive, no matter how it's funded, costs 30 cents per transaction, plus between 1.9 and 2.9 percent with either a Business or a Premier account. And although PayPal allows users in different countries to transfer money to each other, it slaps an additional fee on payments received from senders across any national border. But you're never charged to send money. Confusing, eh?
Debit card convenience
When you receive a payment, PayPal drops it into your PayPal account. To actually get your hands on the funds, you have to request a withdrawal, then wait for the electronic fund transfer to clear so that you can use the money that's in your checking account. In our tests, withdrawn funds were in our checking account three business days later. The other option is to sign up for a Premier or Business account to obtain a PayPal-branded debit card. Once armed with the debit card, you can instantly withdraw received money from any Cirrus/Maestro ATM.
PayPal also sports more extras than Google Checkout. You can store your PayPal funds in an interest-earning money market fund. And if you're willing to part with the 2-percent-per-payment fee, you can mass-produce payments, useful for sending a raft of small cash gifts to nephews and nieces, for example, by using a tab-delimited file, such as one exported from a database or a spreadsheet.