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Hey all ... loyal ING Direct customer here (anyone wishing to open an account please feel free to contact me for the referral -- I still have some slots left!)

I have noticed that my PayPal account is currently paying a slight bit more than ING, and am considering moving a little over there to take advantage. It's not a savings account, so there is more risk.

Does anyone use PayPal for their e-fund?


CPAScott
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Is PayPal FDIC insured? Seems to me that's a big problem, if not (and I thought they were adamant that they were not a bank, and thus could not be regulated as one!)

Maybe there have been new developments in this area that I'm unaware of, though.

-- Mark
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There is an entire cottage industry dedicated to people that hate Paypal. Hyperbole aside you have to ask yourself, would you seriously want to put large amounts of money into a company that generates such strong feelings in that many people? I do have a paypal account for use with Ebay but I link it to a bank account that isn't connected to my main checking account.

If you want higher interest rates I'd suggest EmigrantDirect.
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I wouldn't do PayPal, on the basis of customer service. PayPal is widely infamous for being nearly impossible to deal with. At the first hint of any fraudulent activity, they instantly suspend and freeze all your activity and assets, and it can take months of beating your head against a stone wall to get things resolved.

http://www.paypalsucks.com/ might be worth a glance. Yes, there's lots of "xxxsucks" sites out there, but this one seems to have a substantial quantity of material.

I use PayPal myself only for small purchases off Ebay, and haven't had any problems. But I've read way too many horror stories to trust them for anything more than that.

- Erik
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This is frankly a horrible idea. paypalsucks aside, and that's a big aside, Paypal is not FDIC insured and is their system is an open window to fraud.

Now throw paypalsucks back into the mix and you have a company that regularly makes mistakes, freezes accounts, is open to financial fraud and is generally poor to deal with. This is not the place to store money. If you must use paypal, use it for what it is intended for, a transaction manager. And even then use it sparingly.
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Paypal managed to skirt the issue that they are an unregulated bank by claiming that they were a payment processor and not a bank. It kept them in business, but did not change the fact that they are an unregulated bank.

Even if you pay for purchases using a credit card through Paypal do not expect the same protections as dealing directly with a merchant. Most credit cards companies have added limitations on their liability for transactions processed by a third-party. Paypal is one of the major third parties that the restrictions were designed to cover.

I have not had any problems with Paypal, but I have it linked to a separate checking account that has a limited balance and it is not with my primary bank.

Debra
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I've used PayPal for years just for its MM rates and the 1.5% rebate for using their debit card. It's a handy place to leave a few hundred dollars -- "walking around money". I've never had a problem. But as others have pointed out, money there is not FDIC insured (I think they have some sort of other insurance though, but don't take my word for it). That, coupled with the reason they don't have FDIC insurance, aside from any anecdotes you might have heard, is more than enough so that I'd never put an e-fund in PayPal when there are safer alternatives that pay as much or more.

OS
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Paypal's Money Market fund is just that, a mutual fund.

Unlike checking accounts, money market funds are neither insured nor guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 USD per share, it is possible to lose money by investing in the Fund. Distributed by Funds Distributor, Inc. To learn more about the Fund and its expenses, read the prospectus carefully.

Paypal MoneyMarket Fund Prospectus https://www.paypal.com/en_US/pdf/PayPal_Prospectus.pdf

It isn't even a well managed fund. The yield they quote on Paypal is a 7 day average which gives no real indication of their true performance.

This is an investment fund, plain and simple, and not a very good one IMHO.
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The yield they quote on Paypal is a 7 day average which gives no real indication of their true performance.

Correct me if I'm wrong, but aren't all money market accounts compared using the 7-day yield? MM funds invest in very short-term and liquid instruments, and should not be measured the same way as a bond or stock mutual fund is.

foolazis
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You are probably correct, but my CU shows a annualized yield so I was comparing it to that. And truth be told, the prospectus for PayPal MM does have a chart of the annualized yield. So I'll concede that point. :)
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