General
PayPal: how does it work?
PayPal is a popular way to pay for things online for millions of Australians and people around the world. It’s widely accepted as a payment method across a range of websites, from online retailers like Myer and David Jones to travel and accommodation websites. Best of all, it’s secure and quick.
With PayPal, you don’t need to enter your credit card details on every website you buy from. When you shop with an online store who accepts PayPal, you simply select it as your payment option and authorise the payment.
In this guide we explore some of the most asked questions about PayPal. Any instructions provided here are for accessing PayPal via your web browser, so they may differ slightly if you’re using the PayPal app.
In this article:
- How does PayPal work?
- Is PayPal safe?
- What are the benefits of using PayPal?
- Is PayPal free?
- How do I set up a new PayPal account?
- How do I link a debit or credit card to my PayPal account?
- How do I link a bank account to my PayPal account?
- How do I pay someone using PayPal?
- Where does the money go when someone sends you money via PayPal?
- How do I transfer my PayPal balance into a bank account?
- Are there any fees for transferring my PayPal balance into a bank account?
- How do I delete a PayPal account?
- Can you get scammed using PayPal?
How does PayPal work?
PayPal is like a middleman between you and an online seller. You pay PayPal and PayPal then pays the seller. It’s very quick and simple. Once you set up your PayPal account and link it to your bank or credit card – or both – you’re ready to start using PayPal.
When you’re on the checkout page of an online retailer, you simply select the PayPal option, sign into your PayPal account to authorise the payment and choose which account or card you want the money to come out from. You’re then redirected back to the seller’s website to complete the order process.
With PayPal, you can:
- Pay for things at a range of online stores like Target, Myer, Woolworths, online travel websites and more.
- Pay individuals if you have their email address or mobile number.
- Get paid if you sell something online, like on Gumtree or eBay.
Is PayPal safe?
PayPal is one of the most secure ways you can pay for things online. Credit cards are safe too, but PayPal has an extra level of protection since you can pay for things without having to provide your credit card or bank details to a seller.
However, you still need to play a part in protecting your personal information. Be sure to create a strong passphrase as your password when you make your account so it’s harder for others to hack into.
What are the benefits of using PayPal?
As well as being a secure payment option, PayPal has a Buyer Protection policy that can help you get a refund if an item you have purchased doesn’t turn up, is damaged, or is not as the seller described.
It’s important to note that Buyer Protection does not cover second-hand goods you pick up in person, real estate, motorised vehicles or industrial machinery. Also, any individual transfers using a mobile number or email address are not covered, but more information about this can be found in How do I pay someone using PayPal?
You can learn more about the pros and cons of PayPal in our free short course.
Is PayPal free?
It doesn’t cost anything to create a PayPal account, and there are no charges when you buy something with PayPal. However, PayPal does charge sellers. So if you sell an item online and are paid via PayPal, you will need to pay a small fee.
How do I set up a new PayPal account?
- Go to paypal.com.au and select Sign Up in the top right-hand corner.
- Select Sign Up Now for a personal account.
- Enter your mobile number. PayPal will text you a security code which you will need to enter when prompted.
- Enter your email address and name and create a strong password for your account.
- Add your home address and read PayPal’s user agreement and privacy policy.
- Follow the Get started prompt to link your card or bank account (or both). You’re all set up!
How do I link a debit or credit card to my PayPal account?
- Sign into PayPal and select Wallet at the top of the page.
- Select Link a card.
- Enter your credit or debit card details.
- Select Link Card.
How do I link a bank account to my PayPal account?
- Sign into PayPal and select Wallet at the top of the page.
- Select Link a bank account.
- Select Account type and enter your bank details.
- Select Agree and Link.
- PayPal will then make two small deposits (less than $1) into your account to validate.
How do I pay someone using PayPal?
Let’s say you owe a friend money for your share of lunch. You can pay them back using PayPal if they also have a PayPal account. All you need is their mobile number or email address.
- Sign into PayPal and go to Wallet.
- Enter the email address or mobile number of the person you want to send money to.
- Enter the amount and select + What’s this payment for? to add a personal message for them to see. E.g. ‘For my share of lunch, thanks.’
- Select Continue to review the payment details, i.e. the amount and which account / card you’re sending from.
- Click on Send Money Now.
PayPal will then send your friend an email to let them know they have received money from you.
It’s best to only use this feature for transferring money to people that you know in real life. PayPal’s buyer protection does not apply when you make transfers using an email address or phone number. So, if you are buying something from an online marketplace like eBay or Gumtree, be sure to use their PayPal system.
Where does the money go when someone sends you money via PayPal?
When someone sends you money via PayPal, it goes straight into your PayPal account. You then have the option of leaving the money in your PayPal account as a credit or transferring it to your bank account or visa debit card.
If you choose to leave the money in your PayPal account, you can use it next time you purchase something online. PayPal takes money out of your PayPal account first before it takes it out of your linked card or bank account.
How do I transfer my PayPal balance into a bank account?
Money in your PayPal account appears as a positive balance. You can transfer all or part of it to your bank account.
- Sign into PayPal and go to Wallet.
- Select Transfer Money under your PayPal balance.
- Select Transfer to your bank account.
- Select Instant or Standard transfer.
- Review your transfer details (including the transfer fee for instant transfers) and select Transfer now.
Are there any fees for transferring my PayPal balance into a bank account?
Instant transfers attract a 1% fee capped at $10. For example, a transfer of $55 equates to $54.45 in your account after you're charged a $0.55 fee. However, if you’re in no hurry to receive the money, you can choose a standard transfer for free, but it can take 3-5 business days to appear in your account.
How do I delete a PayPal account?
If you haven’t used your PayPal account in a while or no longer see a need for it, you can delete your account by following these instructions:
- Sign into PayPal.
- Go to the Settings option (cog symbol) in the top right-hand corner next to Log Out.
- Select Close your account at the bottom of the Account options section.
Can you get scammed using PayPal?
Unfortunately, scammers have worked out ways to impersonate PayPal to trick people into handing over personal information or money. However, there are things you can do to protect yourself, including:
- Always set up a strong passphrase for accounts like PayPal.
- Ignore emails that create a sense of urgency combined with a request to click on a link. For example, emails that say your account is about to be suspended or closed, or that suspicious activity has been detected and you need to click on a link to log into your PayPal account to verify your details or review your account activity. These are scams.
- Log in to your PayPal account by entering paypal.com.au into your web browser or by opening the PayPal app on your device, instead of clicking on a link.
- PayPal does not hold funds on behalf of buyers. Any messages you receive saying PayPal is holding funds until you confirm a delivery has been made is a scam.
- Always log into your PayPal account to check whether you’ve received money instead of relying on an email receipt.
Useful information
Learn more about PayPal and how to pay online in our free short course