By Mark Pearl

Credit cards make the Web go ’round, at least as far as shopping goes. But (voluntarily or otherwise) not all of us wield plastic money, and not everyone with something to sell will accept it. That’s particularly true in environments like eBay, where anyone with a stack of old comics can become a merchant in minutes.

Enter PayPal, the most prominent of a handful of payment methods serving the net. It isn’t perfect, but it’s surprisingly painless considering its versatility.

Whether you’re looking to buy things or sell them, setting up an account is a breeze. For buyers, the service is completely free. If you’re using a credit card to buy from a merchant who doesn’t accept them (or for that matter, to send money to a loved one who needs a loan), the process resembles checking out at a normal online retailer; if you’re looking to bypass credit cards, you simply supply information on your checking account. You then authorize payments by giving the site a dollar amount and the email address of the person the money’s going to.

It’s only slightly more complicated on the other end, where PayPal processes others’ payments to you and puts the money in your account. This is where the site makes money, by taking a small fee from what the seller gets — a flat 30 cents plus a percentage that varies from 1.9% to 4.9%, depending on the kind of account. (Whether going through PayPal or a conventional service, accepting credit cards always costs a merchant some fee.)

The service’s advantages can go beyond money transfer. For international purchases, PayPal can help avoid high charges for currency conversion. Those who want to conduct business anonymously will appreciate that an email address is all the other party in the transaction ever needs to know.

And while auctions remain the biggest reason to use PayPal (eBay has owned the company for some time), its usefulness is spreading. When traveling, for instance, it’s a good way to book bed-and-breakfasts that aren’t large enough to accept credit cards; even some airlines have begun to accept PayPal.

Over the years, some heavy users have run into problems. In a 2005 story for PC World Magazine, writer Anne Kandra described system outages that left merchants without access to their money for days at a time. Kandra noted that PayPal transactions “aren’t FDIC insured, which means that their customers aren’t covered by federal banking protections.”

Then there have been customer complaints about accounts getting locked down due to overzealous fraud protection. Inconvenient, to be sure, but it’s better than the opposite.

PayPal offers tools for resolving disputed charges and fraudulent sales, but has no single blanket policy; if there’s a lot of money at stake, make sure your particular purchase is eligible for 100% protection.

The biggest problem is outside the company’s control: Spammers sending fake PayPal messages to trick recipients into giving away account information. As always, the solution is to never follow an email link that requests information, no matter how legit it seems. The ease PayPal brings to online commerce is great, but users should always be wary, lest that simplicity put unwanted hands in their pockets.

Copyright © 2007 | Distributed by Noofangle Media

Subscribe in a reader