PayPal Money Market Fund

[CoryWM]

I found this before I was going to bed, so I'll have to do more research tomorrow. However I am using my paypal account to purchase my gas and food. It's basically another account that I can keep track of this with. The paypal Money market Fund seems to be, basically a non fdic insured fund, that you don't really have to invest your funds. More like a checking account with a return on it that varries.

Anyone have any experience with this? I figure I could earn some little money while spending it, as I transfer my budget into it every 2 weeks.

[sweeps]

Avoid the Paypal MMF. In my experience Paypal is not secure, their customer service is very quick to freeze your account for no good reason, and as you point out your money is not FDIC insured. There are FDIC-insured MMA's that pay a higher rate than Paypal MMF.

Random comment #1: I didn't understand the following comment: "The paypal Money market Fund seems to be, basically a non fdic insured fund, that you don't really have to invest your funds."

Random comment #2: What do you gain by paying for gas and food from your Paypal account? Why not pay for gas and food with a rewards credit card and earn from 2% to 6% on such purchases (and keep your cash for 30 days in a high yield savings account paying >5%)?

[disneysteve]

And for an alternate opinion...

I've had money in my Paypal MMF for years. I keep most of our EF there and have never had a problem. I started using it for my ebay business and nothing beats Paypal for that. As their interest rate gradually climbed, it was often listed 1st or at least top 5 for MMAs in Money and Kiplinger's. Sweeps is correct that there are now higher interest accounts, but I honestly can't be bothered moving my money every time somebody else pays a couple of tenths of a percent more. Paypal is a little over 5% now which I'm satisfied with and I still also use it for my ebay business (and ebay purchases) so it is convenient for me.

So my answer is that it is an okay place to keep your money, but there are higher-yielding options out there.

[poundwise]

I have to go with sweeps on this one. I had a PayPal account, including participation in the money market option, for years with only a couple of minor issues over that span of time, so I've not personally been harmed by them. However, the potential for trouble is very real.

PayPal is not a bank nor an investment firm and as such is not subject to the same rules and regs as those types of institutions. This gives them great freedom in the handling of your account (read the terms and user agreement carefully some time), including freezing your funds and/or reversing transactions, all without notice and without you having any recourse.

Last year, PayPal settled litigation with 28 states; primarily the complaints had to do with frozen accounts and bank accounts being debited when they should not have been. PayPal has also come under fire for misrepresenting the "protections" they claim to offer buyers and sellers.

Now... having said all of that, I typically think that any such entity is going to have detractors and horror stories and, believe it or not, I still think that PayPal is ok as a payment processor for most folks; particularly for eBay transactions. I just wouldn't (a) link my primary bank account to PayPal and/or (b) use PayPal as a savings account (certainly not an emergency fund).

[CoryWM]

Well I'll just lay out my goals, and maybe it'll help illustrate what I'm trying to accomplish.

I want to set aside 300 dollars, in it's own account. And use that money to only pay for my food and gas each month.

My thoughts were, put it in the paypal account, because I already have a debit card with that account, and if I was to convert it to the MMA fund account, it'd be gaining money while it was waiting to be spent.

What is this 30 days to gain interest thing you were referring too? Is it that way with most accounts?

[disneysteve]

I'd ask the same question as sweeps. Rather than paying with your debit card, why not pay with a rewards credit card. That way you would be getting something back and your money would be earning interest for longer before you had to pay the credit card bill.

[CoryWM]

OH! I get what you guys are saying now.

Well, I currently have a credit score of 637, and I had a credit card in the past, with Bank of America, which btw, I hate bank of america. But it was one where you had to give them money, it was meant as a starter card. That was such a hassle.

The whole experience really made me hate credit cards. What I don't like is, I've done it in the past, not very often, but lets say, theres a toy or event I want to buy. It's too easy to simply, pay it off next month, and get the item this month.. I'd like to avoid that. Tis why I like debit cards.

[jmjj215]

Based on your past experience with credit cards, and your openness about the temptation they are to you, I'd avoid using the CC.

I use Paypal to run my business and have never had a problem with them. I keep all of the business money in there and treat that as the "Business Account". The interest rate is just gravy. Though I would probably be quicker to draw the money down if that rate weren't there.