Anyone use Paypal Money Market?

[disneysteve]

Paypal's money market pays 4.82% currently. I buy and sell on ebay so I have a Paypal account anyway. I see no point in constantly transferring money in and out of there when I can just leave it there and earn a very competitive rate. In fact, I've recently transferred several thousand into that account. I know I could get 5.05% elsewhere, but I don't think that's a big enough spread to be worth opening a new account.

[sweeps]

I mentioned this in another thread: Paypal isn't protected by FDIC and because of the nature of Paypal, you're more subject to hackers, scammers and overzealous CSRs than the average bank. If you need the money there for ebay transactions, that's one thing, but I wouldn't keep my "safe" money there.

[msnln]

I keep my emergency funds with Paypal as I have paypal debit card and paypal pays competitive rates. I also have few bill payments linked to paypal as paypal debit card pays back 1.5% into the account. I would not keep too much there but between 1-2K all the time.

[jmjj215]

The 4.82% posted rate doesn't include their 1/4 point fee. So it's really 4.57%.

Sweeps, what makes you think Paypal is more subject to hacking than a bank?

I keep business money in there until I need it somewhere else. I don't purposely put money in Paypal for the rate.

[disneysteve]

Originally Posted by jmjj215

The 4.82% posted rate doesn't include their 1/4 point fee. So it's really 4.57%.

What fee are you talking about? According to the fund prospectus, operating expenses are already factored in to the posted return.

[jmjj215]

When the first announced they were doing the fee (some time last year), I was under the impression that the rate was not posted net of any fees. Perhaps I was wrong there (happily wrong I might add!).

[sweeps]

Originally Posted by jmjj215

Sweeps, what makes you think Paypal is more subject to hacking than a bank?

For the record, I said "the average bank".

I don't have any official statistics or studies to quote, but I have a fair amount of anecdotal evidence. Also just the sheer quantity of paypal users (many of them less than internet-savvy) makes it a tempting target for hackers. Then there's the google test -- search for paypal hacking vs. <insert bank name here> hacking. I think you'll find a lot more interesting hits with the prior than with the latter.

[poundwise]

I'm not sure PayPal is actually 'hacked' so much as people as are ignorant and open up themselves to danger by responding to phony e-mails and other phishing schemes.

I use PayPal. I use the money market. I use the debit card. I love the idea of (take note of this) earning cash back on a debit card while the balance earns 4+% interest. What's not to love!?

Having said that, I do not think (right or wrong) of PayPal as a bank or as an alternative to my online MMA (savings) account. We put money into PayPal to use for groceries and a few other common transactions. I earn for using the debit card, I earn interest, and I think its a very useful tool. I recommend it. But I do not recommend it as a savings account or to maintain a large balance.

[disneysteve]

Originally Posted by poundwise

But I do not recommend it as a savings account or to maintain a large balance.

Why not? Just curious. What's the difference between Vanguard's money market fund and Paypal's money market fund, for example? Neither is FDIC insured.

[poundwise]

I'm not concerned with the FDIC in this instance.

I simply don't think of it as an alternative to savings. I find it to be a great cash-flow tool.

[disneysteve]

Originally Posted by poundwise

I'm not concerned with the FDIC in this instance.

I simply don't think of it as an alternative to savings. I find it to be a great cash-flow tool.

I don't think of it as an alternative to savings. I think of it as savings. I've often heard and read financial folks recommending a money market mutual fund as a good place to keep your emergency fund, and that's what I've always done myself. That said, I think Paypal's fund is just as good as anyone else's, and better if the interest paid is higher.

So are you not a fan of money market mutual funds in general, or just Paypal's specifically?

[poundwise]

You can obtain higher interest in several other MMAs. PayPal's bank transfer speed is woefully slow. And when I put money in savings, I don't intend to spend it. That is, while I may make a withdrawal from time to time, I certainly don't spend from it weekly or daily as I do with my PayPal account. PayPal is not a bank and they are specific in telling you that. The term PayPal money-market is even a misnomer. You can have a PayPal account without having any participation in a money market. The money market investment is through Barclay's. Your investment with them is transparent, but is third-party. Lastly, I don't like the idea of my savings account being tied to a debit card/number.

For money that I am utilizing, PayPal is terrific. I earn interest on the balance, even though the balance changes virtually everyday. The charges (debits) that I make using my PayPal debit card give me cash back bonuses. That is all great. When all is said and done though, I'd rather have my mid to long term savings in a bank MMA savings account with higher, established interest and features (like faster transfers) geared toward saving.

If you want to keep you money in the PayPal account as a savings, then that is your business. If you are asking my opinion, which I believe you did, then my opinion is that a PayPal account, tied to the Barclay's money market, and with the cash back is a great account to have. I would (and do) also, however, maintain a separate MMA for savings.

[disneysteve]

Originally Posted by poundwise

And when I put money in savings, I don't intend to spend it. That is, while I may make a withdrawal from time to time, I certainly don't spend from it weekly or daily as I do with my PayPal account.

Lastly, I don't like the idea of my savings account being tied to a debit card/number.

Thanks for the input. You and I use our Paypal accounts differently. I park money there and leave it there, except for the occasional pay out for an ebay purchase or the deposit from an ebay sale. I don't have a Paypal debit card so I don't spend that money often - hardly at all actually. Because of that, the transfer speed isn't particularly important to me. I have more readily accessible money elsewhere for emergencies. As for the interest rate, I could do a little better, like 5.05% now instead of 4.82, but for the amount of money I'm keeping there, that spread isn't enough to me to bother with yet another account to keep track of. Thanks for sharing your opinion.

There are so many savings options out there now. Probably isn't one ideal option for everyone as it depends on a lot of factors as you detailed.

[Crystallas]

I park funds on paypal just because I know that its my ebay spending limit.

I've made maybe $30 bucks total. Nothing to jump up and down about, but its definately nice of them to offer a respectable rate for people holding funds in their service.

[jmjj215]

Originally Posted by disneysteve

Why not? Just curious. What's the difference between Vanguard's money market fund and Paypal's money market fund, for example? Neither is FDIC insured.

There's no difference (to me) except for the potential risks that come along with Paypal. Though, for the record, I've never had a single solitary problem with Paypal. And I've been using them on a daily basis for the past 2+ years. For whatever that's worth.

[jmjj215]

Originally Posted by jmjj215

There's no difference (to me) except for the potential risks that come along with Paypal. Though, for the record, I've never had a single solitary problem with Paypal. And I've been using them on a daily basis for the past 2+ years. For whatever that's worth.

Sorry to quote myself, but you should also note that the paypalsucks site is hawking their own merchant account solution.