What is PayPal?

PayPal is an online money transfer system. It is a widely recognized online e-commerce business. It is not only used to transfer money but also for other online activities like buying low cost products, online auctions, purchasing e-books and pay to surf programs. It is used by more than 150 million users worldwide. And it is available in 24 currencies.

Many companies from countries like United States outsource their work like data conversion, software development, transcription, designing to India. Their most favorable payment mode is PayPal. You can also use PayPal to send money to india.

How to Open a PayPal Account?

Opening account in PayPal is very easy. What you need is a valid e-mail address and valid credit card. And it is free to open account in PayPal. A PayPal account can be used to make customer to customer transaction and also to make business to end user payments. Due to PayPal account a customer can make payments efficiently to small online vendors.

Types of PayPal Accounts

PayPal offers three types of accounts – Personal Account, Premier Account and Business Account.

Personal Account: A PayPal personal account offers restricted features. You can send money to other PayPal account or receive money from other accounts. But you cannot accept payments from credit cards and debit cards. A personal account holder has to accept or deny the payment received by him manually.

Premier Account: Once you upgrade your account to premier account, you can accept payments from credit card and debit card. Also it allows you to make safe and protected payments on eBay and other business websites.

Business Account: A business account allows you to receive payments through all payment types and for small fees. It also permits to accept payments from those customers who don’t have PayPal account.

While receiving a payment in personal account is free, you have to pay a fee for receiving payments in premier and business accounts.

How to Add Funds to PayPal Account?

When the payment is send to receiver’s account, PayPal sends an e-mail to tell the receiver about payment. Following are some ways by which one can add funds to his PayPal account –

1. A user can debit from a bank account in US for any payment.
2. A user can charge a credit card for any payment. But PayPal may not agree to some types of credit cards.
3. A user can collect money from any othe PayPal user.

How to Verify a PayPal Account?

To verify your PayPal account, you have to add your credit card or debit card details to account information. The one reason you should verify your account is that if your account is unverified then the sending limits are US$ 100 while receiving limits are US$ 500. Once your account is verified the limits are lifted.

The other main reason is that there are maximum chances of fraud with unverified accounts. So the payments from unverified accounts are not accepted by many online vendors.

If PayPal becomes suspicious, it can freeze your account. Once your account freezes, you can not withdraw money from it. If you have used your debit card to verify the account, it will freeze your debit card also which will disturb your bank account. So it is advisable that while verifying the account, one should use a credit card.

Withdrawing Money from PayPal and Processing Fees:

A PayPal account holder can withdraw his money to the US bank account without any charges. It is a little time consuming and the US bank account can be opened by only US residents or emigrants.

In other countries, the processing fee for withdrawing money into bank accounts is determined by the currency and country.

To send payments, the currencies used by PayPal are Canadian Dollar, Pound Sterling, U.S. Dollar, Euro, Australian dollar and Japanese Yen. The processing fee of US$ 10 to US$ 20 is charged by most of the banks in India to process the foreign currency cheques.

So if your bank choice is wrong, and you withdraw a small amount like $20 by cheque, after deducting processing fees, the amount you get is only $2 to $10. The solution for this problem is that deposit all small amount payments in PayPal account and when the amount is considerable then only withdraw the money by cheque.

Now, from 2004, Indian residents can withdraw the money from their PayPal account in Indian rupees cheques. The processing fee charged by PayPal is US$ 5. And you should withdraw minimum amount of US$ 150. The cheque of withdrawn money is drawn on Citibank and is send to you by post. And the requested cheque can not be cancelled afterward. Only thing is that the exchange rate applied for this transaction is lesser than the Telegraphic Transfer exchange rate.

In 2007, PayPal introduced EFT transfer. This system uses RBI's NEFT to transfer funds from PayPal's associate Banks (Citibank & Deutsche Bank) to Indian bank accounts. You have to add your core-banking enabled bank account & IFSC code of the bank to withdraw this way.

In 2008, PayPal introduced withdrawal to credit cards; which works almost the reverse way of paying through credit card. Money will be deposited in your credit card account and you can withdraw / use it as you normally use your credit card. When you use this method, you will be surprised to see a negative balance in your next credit card statement.

In a month you can withdraw maximum amount of US$ 2500 using all these methods. This is the upper withdrawal limit.