Learn How to Send and Receive Money With PayPal

Understanding PayPal: What It Is and How It Works

PayPal is a digital payment platform that lets people send and receive money online. Founded in 1998, PayPal has grown to serve over 429 million active user accounts worldwide as of 2024. The service operates in more than 200 countries and territories, making it one of the largest online payment systems globally.

At its core, PayPal functions as a middleman between your bank account (or credit card) and the person or business you want to pay. Instead of sharing your financial information directly with someone online, you share only your PayPal account details. This layer of protection means your bank account number and credit card information stay private during transactions.

PayPal offers several account types designed for different needs. A personal account is meant for individuals who send and receive money for personal reasons. A business account is designed for people who regularly sell items or offer services. A Premier account, which is no longer available to new users, was an older business account option. Most new users open either a personal or business account depending on their primary use.

The platform uses encryption technology to protect your information. When you create a PayPal account, the company stores your data on secure servers. All transactions are encrypted, meaning the information travels in a coded format that is difficult to intercept. PayPal also monitors accounts for unusual activity and contacts users if suspicious transactions are detected.

Understanding these basics helps you recognize what PayPal can and cannot do. It is a payment tool, not a bank, though it does offer some bank-like features through partnerships with financial institutions. PayPal cannot force someone to pay you or guarantee that a transaction will succeed—it simply provides the platform and tools for the transfer to happen.

Practical takeaway: Before setting up an account, consider whether you need a personal account (for occasional payments to friends and family) or a business account (if you plan to receive regular payments from customers).

Setting Up Your PayPal Account: Step-by-Step Instructions

Creating a PayPal account begins with visiting the PayPal website or using the PayPal mobile app, which is available on iOS and Android devices. The basic setup process takes about 10 to 15 minutes. You will need a valid email address, a phone number, and information about a bank account, debit card, or credit card to link to your account.

The first step is entering your email address. PayPal uses this as your login identifier and as the way other users contact you about payments. Choose an email you check regularly. If you do not have an email address, you can create one for free through providers like Gmail, Outlook, or Yahoo.

Next, you will create a password. PayPal requires passwords to be at least 8 characters long and recommends using a mix of uppercase letters, lowercase letters, numbers, and symbols. A strong password makes it harder for someone to guess your account information. Writing your password in a secure location—such as a password manager app—helps you remember it without writing it on paper where someone might find it.

You will then provide your full name, address, phone number, and date of birth. This information is used to verify your identity and comply with laws that require payment platforms to know who their users are. PayPal may ask for additional information depending on your location and account type.

After entering personal details, you need to link a payment method. This can be a bank account, debit card, or credit card. To link a bank account, you will provide your routing number and account number. These numbers appear on the bottom left of your checks. If you are linking a debit or credit card, you will enter the card number, expiration date, and security code (the three or four digit number on the back).

PayPal may send small test deposits (typically between $0.01 and $0.99) to your bank account to verify it is real. You will need to check your bank statement and report these amounts back to PayPal within a few days. This verification step prevents fraud and confirms you have access to the account.

Once your payment method is verified, your account is ready to use. You can begin sending money immediately, though receiving money may have restrictions based on your account age and verification status. New accounts sometimes have limits on how much money can be received in the first 180 days.

Practical takeaway: Keep your login email and password in a secure location separate from your PayPal account itself. If you forget your password, you can reset it using your email address, but if someone gains access to your email account, they can potentially access your PayPal account.

How to Send Money Through PayPal

Sending money with PayPal can be done in several ways depending on whether you are sending to someone in the United States or internationally, and whether you are sending through the website or mobile app. The basic process is similar across all methods.

To send money using the PayPal website, log in to your account and look for the "Send money" button, usually located on the homepage. Click it to begin the process. You will see options to send as a "Friends and Family" payment or as a "Goods and Services" payment. The Friends and Family option is used when sending money to someone you know for personal reasons, such as splitting a restaurant bill or repaying a loan. The Goods and Services option is used when paying for something someone is selling to you, as it provides buyer protection.

Next, enter the recipient's email address or phone number. PayPal will search its system to see if this person has a PayPal account. If they do, the payment will be linked directly to their account. If they do not have a PayPal account, they will receive an email or text message with a link to claim the money. They will need to create an account to receive it, or in some cases, they can receive funds without opening an account.

Enter the amount you want to send. PayPal will calculate any fees that apply. For Friends and Family payments, there is typically no fee if you are sending from your PayPal balance or a linked bank account. There is a fee (usually around 2.9% plus $0.30) if you send using a credit or debit card. For Goods and Services payments, there is always a fee that the sender pays, which is why this option is typically used by buyers, not friends splitting costs.

You can add a note explaining the purpose of the payment, though this is optional. For example, "Rent for March" or "Concert tickets" helps the recipient remember why they received the money.

Review all the details before confirming the payment. Make sure the amount, recipient, and payment type are correct. Once you click "Send", the transaction typically processes within minutes. You will receive a confirmation email, and the recipient will be notified.

For international payments, the process is similar, but additional options appear. You can choose whether the recipient receives the money in their local currency or in U.S. dollars. International payments have higher fees—usually 2% to 3% of the amount plus a fixed fee that varies by country. Exchange rates apply if you are converting currencies.

The PayPal mobile app streamlines this process by allowing you to send money with just a few taps. Many users find the app faster for routine payments because it remembers frequent recipients and autofills their information.

Practical takeaway: Always double-check the recipient's email address or phone number before sending money. Typos can send your payment to the wrong person, and recovering the funds may take time.

How to Receive Money Through PayPal

Receiving money with PayPal is often simpler than sending it because the other person initiates the transaction. However, there are several ways someone can send money to you, and understanding each method helps you prepare your account.

The most straightforward way to receive money is by giving someone your PayPal email address. They can log into their PayPal account, click "Send money," enter your email, and follow the steps to send you funds. The money arrives in your PayPal account balance within minutes, and you are notified by email or through the app.

You can also receive money by sharing a payment request link. When you create a request, PayPal generates a unique link that you can share via email, text message, or a messaging app. The person clicking the link is taken directly to a payment form with your name and the amount already filled in. They simply enter their