PayPal Money Market Fund

[Dani]

I like the idea of receiving a return on what I keep in my PayPal balance, but how safe is doing this? Is it safe to keep a lot of money in my PayPal account (which I have had hooked up to two credit cards and two bank accounts for a good amount of time already). Generally, I drain my PayPal account bi-monthly - but I'm reconsidering perhaps leaving money in it?

[winbatch]

You should look into one of the online savings banks like ING, Emigrant Direct, HSBC, etc. Really good rates, no minimum balance, etc.

[cpopham]

Yes, ING is good. I have had a savings account with them for quite sometime now. However, their turnarounds are really slow. I have had it take up to a week and a half to get my money deposited into my checking account from ING. Their minimum is 3 days, but that is only an estimate. So, if you need your money in a hurry, don't tie it up in ING. They are paying about 3.75% right now on savings which is really good compared to my local bank. So if they are slow, at least you get more interest!

Chester

[winbatch]

They are paying about 3.75% right now on savings which is really good compared to my local bank.
Chester

Actually, you should look at emigrant and hsbc who are offering 4.25%

[bobfromphilly]

Pay Pal is a great idea, i have been using it for 2 years with no trouble at all, cometitve interest rates, easy on line access to your acct info., sending money and its owned by e-bay.

~Bob~

[ShaneMcP]

As far as your money being secure or insured through Paypal's money market account, its not. Although I signed up for it (just for the heck of it) I do recall the warning that it is not, here it is:

Unlike checking accounts, money market funds are neither insured nor guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 USD per share, it is possible to lose money by investing in the Fund. Distributed by Funds Distributor, Inc. To learn more about the Fund and its expenses, read the prospectus carefully.

Sounds scary! Go with whatever bank insures the amount. I don't even think the yield is guaranteed.

[stupidfly]

Sorry to bump an old thread... but has anyone actually used this? What do you think of it? Ever lost any money? It kinda seems too easy, which is what scares me.

[stupidfly]

I've decided to bite the bullet and try the Money Market Fund. I put $100 in. I'll reply to this topic in about a month to see how it went.

[einfoway]

Hi,

I have been using paypal from last 4 years (may be more).... But never ever got any interest on my funds.? Does paypal paypal pays interest on our money???

I had a issue with paypal ... twice.

1) I had $xxx in my account.. i logged in saw all is gone only $7 was left. it said i bought some online books and CD's.... but never ever got any such stuff. I made a formal complain to paypal guys and it took one month after which they looked in to the matter and said "Sorry we cant help you"!!. I am from INDIA even then tried calling them many times and was put on HOLD for xxminutes.

2) I did one project for US client. All was done and got payments via paypal. so i delivered the project as well. I got a email saying client has asked for refuund and amount was back in his account. Nor client nor Paypal guys return back with reply to my emails etc.

So i think keeing payments in paypal is a bit danger.

Also as we are from INDIA we cant have online US bank accounts so that we can link to paypal and get funds transfered to that as and when we need to invest.

If any one has any ideas on it do let me know.

Regards

[Hantra]

Take that money OUT of Paypal!! Always keep Paypal empty.

I used to be enticed by the high MM rates there, but those people can take your money any time they want and there's not a thing you can do about it.

If you do a transaction with someone for an item, and then 2 weeks after they get it, they don't like it, all they have to do is file a complaint with Paypal. Your money is locked up for at least 2-3 weeks while there is an "investigation".

I don't need that hassle. Try ING Direct.

[einfoway]

You cant live without paypal. though we know its very very risky, their is no other system like that. as easy for payments from clients.

if we go with any other payment gateways its always diff to integrate, also initial cost is high, transfer cost is also high, transction cost is high and all customers dont perfer to use their CC on all sites.

how does direct ING works.

if any one know better payment gateway do let us know.

Regards

[Hantra]

By all means USE Paypal. I use it weekly, but don't leave money in it is my point. Drain it as soon as money hits.

[einfoway]

yes thats the only thing we can do. As we are from INDIA even thats difficuilt. we get check after 15-20 days

[ShaneMcP]

By all means USE Paypal. I use it weekly, but don't leave money in it is my point. Drain it as soon as money hits.

I agree! There are money market accounts available online that do offer protection! Some ARE FDIC insured! Here's one I just found:

https://www.amtrustdirect.com/Application/MMWiz.aspx
This IS FDIC backed!

Make sure you check to see how long it takes to withdraw money! That's one of THE most important features of online accounts.

[rudolphg76]

I was shocked to find out what people on this thread are posting. It seems like those advising her not to keep money long-term in paypal, and instead to keep her money in a FDIC insured bank aren't comprehending that all an FDIC insured account means is that "you lose money".
Paypal as a money market mutual fund pays off on average a higher interest yield than any ING savings or bank FDIC insured money market account I've ever seen.
As far as the warning of Paypal not being FDIC insured. I hope you realize that money market funds are NEVER FDIC insured. Only bank accounts are. However, FDIC insured means virtually nothing. It protects your money up to a limit and you end up paying for it in the long run by an incredibly low or no return whatsoever. The bank then turns around and invests your hard earned cash for a nice profit for themselves. Paypal as a money market account, pays a healthy return and is very very SAFE. Money market mutual funds like paypal, are not susceptible to the volatility of the stock market (which typically pays an even higher interest). So what if its money market funds are not FDIC insured? ITs virtualy impossible to lose money through a money market mutual fund. There has neve been a situation when people lost money on it.
Paypal, like many other money market mutual funds, does not attempt to beat the market. Just match it. The fund preserves each share at 1 dollar value a share. You CANT LOSE!
With the talk I hear from everyone here advising her to remove her money from paypal currnently paying out 5.02% yield, and putting it into ING direct and other accounts paying only 2 or 3% yield the most, I would like to hear one person on this thread explain to me how they have lost ANY money on paypal through the money market fund. I'm not talking about through a sale or dispute with a client. I'm talking about someone here who ivested 3,000 dolloars into the paypal money market fund, only to find that a year later, he lost money because the fund went down and he now only has 2,500 in his account. If someone here can tell me that this hoenstly happened to him, I will shut up.
Until then, I suggest that the topic creator (if she doens't feel like investing in stocks at the moment) to keep a healthy amount of her money in Paypal money market fund, a safe storing place that gives a healthy return and relatively easy access to her money at any time.

[bugmenot]

The above poster is correct about money market funds in general
(that they carry some small amount of risk as an investment). However, this is not the main problem with Paypal.

The problem is, Paypal is NOT a financial institution, but they pretend
to be one. There is no oversight from the government or industry groups. In fact, it deliberately attempts to avoid such regulation. And your account itself (even if you don't participate in the money market) is NOT FDIC insured. It's literally a record in a database table somewhere. If your account suddenly gets drained one day, or the company goes bankrupt, or defaults on its debt, or any other bad scenario you can imagine... well, let's just say, good luck getting your money out. But a more likely (and very common - just search around for stories) scenario is, they may freeze your account at whim (preventing you from withdrawing funds for an arbitrary period of time). There have been a few high profile cases like this recently. Many users have even filed class action lawsuits against Paypal for these incidents.

There are many well-established banks which will let you open an online account and earn a return virtually identical to Paypal's (others have mentioned some names, HSBC is one I can personally vouch for). In the case of HSBC, you can get virtually the SAME interest rate as Paypal and it's a savings account, which means, absolutely zero risk (and of course it's FDIC insured, because it is provided by a reputable bank, not a "money transfer agent").

My advice is, never leave a nontrivial amount of money in a Paypal account. Just use it for your auctions, if at all.

[Dani]

Hi everyone ... thank you for all of your suggestions. What I now do is make use of a CitiBank eSavings account ... a money market account which can only be opened online via citibank.com. They give 5% interest and what I like most about it is that I can link it up to my CitiBank checking account and do instant transfers between the two. I don't think the worry associated with PayPal is worth it for the tiny amount over 5% that they offer.

[einfoway]

Is HSBC for indians also. Can you give me some idea as how it works.

[tigerwlf]

I haven't had any issues with accessing money from paypal before or after signing up for their fund.

Though here are some things to consider.

Money magazine rates it as one of the best high earning money market funds.

Barrons shows the fund to have assets of 880 million as of march 9, 2007.

The fund is not managed by paypal, but a separate entity, Barclays Global Investors, which is a highly rated company.

Money market funds are not money market accounts.
Hence the confusion of FDIC insured and not.

"Since money market funds are not FDIC insured, there is no government guarantee of a return of principal. However, these funds are regulated under Rule 2a-7 of the Investment Company Act of 1940 which regulates mutual funds" from
http://www.bestcashcow.com/moneymarket.html

With such a large volume of business that Paypal does, it is obvious that you would have a large number of disgruntled customers. The unhappy customers are the loudest. The millions of satisfied customers are rarely heard. Also look at dates of complaints when looking on the net. :)

I know you already chose a CitiBank eSavings and its cool you found something you are comfortable with and works for you. I just wanted to take a moment and comment. Being comfortable with what you choose is the main priority, especially in financial arena.

Thanks for your time. :)
Have a wonderful day.

[Dani]

HSBC is the name of a bank.

tigerwlf, your comments couldn't have come at a better time, as CitiBank just recently lowered the interest rates of the eSavings account from 5% to 4.75%, making PayPal, at just over 5% and holding, all the more tempting.

I signed up for the PayPal Money Market right before the beginning of 2007. I was looking at the amounts it has paid out, and realized it was more than I expected, so I was searching for more information about it, and came across this thread. So far, it has paid out more than I expected, and I'm glad I signed up for it. It's always good to diversify though, just in case.

One note: we use PayPal to sell goods through our website, rather than using it for eBay transactions. Using it for eBay transactions can be a bit dicey.