e-Saving account or PayPal money market?

[aleish]

What is better, an e-Savings account with 4.88% interest, or a PayPal Money Market with 5.03% yield?

[Broken Arrow]

There are e-savings accounts that will pay more than 5% now. Poundwise has a sticky thread on the list of interest rates, and it's updated frequently.

[poundwise]

Using PayPal for savings is a poor idea.

PayPal is not a bank. This being the case, they are not subject to banking rules and regs. This has resulted in a few problems for people including the freezing of funds, which is done solely at their discretion whenever they initiate an investigation. There are a number of triggers for this, however, the most common is when someone uses a credit card in a fraudulent (or suspected so) manner. If someone pays you through PayPal but is investigated for fraud, your account, as the recipient of those funds, will almost certainly be frozen until they sort it out. While this may be considered unlikely, it certainly does, and can, happen.

"Once an investigation is underway, your PayPal account could be frozen or closed temporarily or permanently."

The money market option for PayPal members is not a guaranteed return. Though unlikely, as the fund is managed by Barclays, you could actually even lose money investing in the money market fund.

"The PayPal Money Market Fund is not FDIC insured, not guaranteed by any bank and may lose value."

While I don't suggest that any of these things necessarily keep people from using PayPal as an online payment method, it doesn't make a true, viable alternative to an FDIC insured bank, online or otherwise.

Besides, as the above poster mentioned, there are a multiplicity of banks offering 5.00% to 5.50% APY on online savings accounts now. (See link in my signature.)


(The quotes above are from the PayPal User Agreement and Help Center)

[aleish]

Thank you very much for the information and advice Broken Arrow and Poundwise!

[sweeps]

Poundwise is right. You don't want your savings -- especially your emergency fund savings -- frozen at Paypal. It's very frustrating to be at the mercy of Paypal's CSRs. It's happened to me, and I've read several other similar stories as well.

Stick with a 5.25%+ FDIC-insured bank for your savings.

[puck36]

HSBC online savings is at 5.05% and all it takes is $1.00 to open the account.

[poundwise]

Originally Posted by puck36

HSBC online savings is at 5.05% and all it takes is $1.00 to open the account.

Yes. Emigrant Direct is the same and Amboy Direct is offering 5.25%.

As I said, click the link in my signature to see a more complete listing.

[aleish]

thank you for your advice. I realized now that e-saving account is better and there are many banks that offers higher APY than PayPal.. thank you so much for the infpormations.

[rduell]

I opened an Amboy account last week and it's very easy to make deposits. I like to set up a deposit a few days ahead of time dated for the day after I deposit paychecks so that I know I'm paying myself first.

[junger]

There are so many online savings accounts available offering ridiculously high-yields in comparison to brick and mortars. And the money is liquid, so it won't be tied up.

My favorite part is watching the money grow everyday.

[tener]

you should also extra careful when dealing with companies that are new to banking i.e. paypal, they already have plenty of dissatisfied customers in their main area of business (internet payments)