What bank does PayPal use? PayPal Products and Services PayPal is known best as a simple way to send and receive money and make online purchases. But it also provides some of the same features as many online checking accounts and even offers a savings account. So is PayPal now a bank? If not, what bank is PayPal partnered with? Here are some things to know about PayPal and its money management features if you have a PayPal account.
What bank does PayPal use?
Although PayPal is not a bank, it collaborates with banks such as The Bancorp Bank and Synchrony Bank to provide products such as debit cards, prepaid cards, credit cards, and lines of credit.
PayPal allows you to link an external bank account, credit card, or debit card and use the service to securely shop online. It acts as a go-between for your payment method and merchants, keeping your payment information secure.
PayPal can also be used to make online payments or to transfer money between friends, family, and business partners.
PayPal provides a variety of financial services and products that may meet some people’s banking needs. You can pay your bills with PayPal online or through the PayPal app. Some PayPal credit cards, debit cards, or financing options may be useful if you’re looking for a convenient way to get more benefits from your PayPal account. Because PayPal is not a bank, any money you leave in your PayPal account is not FDIC insured in the same way that it would be in a bank account. If you want FDIC protection for your PayPal balance, you should request (and receive) a PayPal Cash Card.
PayPal may not be able to take the place of a bank. It may not be the best option if you want the security and convenience of a bank checking account or credit union share draft account. Although PayPal offers some useful financial products and tools for online payments, you should look elsewhere for the relationship that will serve as your financial home base.
How Does PayPal Work With Program Banks?
Your PayPal balance isn’t FDIC-insured since PayPal isn’t an actual bank. However, by enrolling in specific PayPal products, your PayPal account balance is held and FDIC-insured up to applicable limits by one of the PayPal program banks.
PayPal puts your PayPal balance in a program bank that provides FDIC pass-through insurance if you have any of the following:
- A PayPal Debit Mastercard
- Any enrolled direct deposits
- Cryptocurrency received or bought via PayPal
PayPal savings account deposits are FDIC-insured and held by Synchrony Bank.
If a program bank holds your PayPal balance, any time you add funds to or receive money in your PayPal account, that money is automatically moved to the program bank by PayPal. You don’t have to take any additional steps to ensure the security of your money.
It is important to know if your PayPal balance is or isn’t FDIC-insured if you keep a balance in your PayPal account. For instance, if you use your PayPal account to accept payment for freelance services, those funds aren’t FDIC-insured if you don’t have a PayPal debit card, haven’t enrolled in direct deposit and have never bought or received cryptocurrency via PayPal. Additionally, if you have funds in a PayPal business account or hold other cryptocurrencies or non-U.S. dollar currencies in your personal PayPal account, your funds are not protected should PayPal fail.
PayPal Products and Services
PayPal offers several banking products and financing options:
- PayPal Cash and Cash Plus Accounts. If you want to keep money in PayPal, you’ll need either a PayPal Cash or PayPal Cash Plus account linked to your personal account. These two cash balance accounts let you send money from your PayPal balance, hold money in
- PayPal and shop in-store with your balance with Google Pay or Samsung Pay (where accepted). PayPal Cash Plus is a more advanced account that you get when you apply for a PayPal Cash Mastercard or enroll in direct deposit to add your paychecks to your PayPal balance automatically.
- PayPal Cash Mastercard. This debit card lets you use your PayPal balance to spend money online or in stores, wherever Mastercard is accepted, just like a bank account with a debit card. You can also use this card to withdraw cash, fee-free, at more than 33,000
- MoneyPass ATMs worldwide. There’s no monthly fee, no minimum balance and no credit check to get this card. Receiving this card also makes your PayPal Cash Plus account balance eligible for pass-through FDIC insurance, through one or more partner banks. (More on FDIC insurance below.)
- PayPal Prepaid Mastercard. This prepaid card gives you a convenient way to manage your spending, while also giving you the option of setting up a tiered-rate savings account that offers 5.00% APY on an average daily balance of $1,000 or less. Any portion of the balance above $1,000 earns 0.50% APY. This account is FDIC insured through The Bancorp Bank.
- PayPal Cashback Mastercard®*. This credit card pays 3% cash back when checking out with Paypal and 2% on all other purchases where Mastercard is accepted, with no annual fee and no category restrictions.
- PayPal Extras Mastercard®*. This credit card offers reward points for spending in specific categories. Cardholders earn 3 points per dollar spent on gas and restaurant purchases, 2 points per dollar spent on PayPal and eBay purchases, and 1 point per dollar spent on all other Mastercard purchases. You can redeem rewards for cash back, travel vouchers, gift cards or merchandise.
- PayPal Credit. This is a digital, reusable credit line that allows you to pay over time for purchases of $99 or more. If you pay off your purchase within six months, you won’t owe interest. There’s no annual fee, and you can use PayPal Credit wherever PayPal is accepted.
- Pay in 4. This is a buy now, pay later option that lets you use PayPal to pay for a purchase in four installments, with one payment every two weeks. These installment payments are interest-free and using this option does not affect your credit score.
Can PayPal Serve as Your Bank Account?
PayPal offers several financial services and products that may serve the banking needs of some people. You can use PayPal to pay your bills, online or from the PayPal app. If you’re looking for a convenient way to get more benefits from your PayPal account, some of the PayPal credit cards, debit cards or financing options could be helpful.
Especially if you can’t qualify to open a traditional bank account because of a bad ChexSystems score, PayPal may offer an effective way to manage your money.
PayPal itself is not a bank, so, if you are leaving money in your PayPal account, that money is not FDIC insured in the same way it would be in a bank account. If you want FDIC insurance for your PayPal balance, your best option is to request (and receive) a PayPal Cash Card.
Once you have a PayPal Cash Card, PayPal will begin to deposit your funds into a pooled account held by PayPal at an FDIC-insured bank. PayPal’s intent is to provide these funds with the benefit of pass-through FDIC insurance up to the applicable limits. With that being said, if you are keeping a significant amount of funds in your account, we’d recommend using an account that offers direct FDIC insurance.
PayPal also doesn’t offer the same range of financial products and experiences as a full-service bank. One small example: PayPal doesn’t provide paper checks, often a standard feature offered with checking accounts found at banks. And, if you want the in-person experience of a brick-and-mortar bank, PayPal isn’t the service for you. PayPal also doesn’t provide other products and services that you may find at a full-service bank, such as auto loans, home mortgages, home equity lines of credit or wealth management.
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