How Safe is your PayPal Balance?

Bank Failures, The stock market losing hundreds of points each day…How safe is my PayPal balance?  I’ve posted about eBay’s decision to eliminate paper payments, that leaves PayPal as the only practical payment method for the casual seller or hobbyist.

I came across this article, Are your PayPal Funds Safe?

Since PayPal is not a bank, funds are not directly covered by FDIC (Federal Deposit Insurance Corporation). They are covered by what’s called FDIC Pass-Through Insurance. But pay attention, if your funds are in PayPal’s money market fund, they are not covered at all by FDIC and may lose value.

PayPal, has this to say about FDIC pass-through insurance.

If you do hold a balance, you can do so in two ways: (1) PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage; or (2) you can elect to earn a return on your funds by enrolling to invest all funds that you receive into the PayPal Money Market Fund. The PayPal Money Market Fund is not FDIC insured, not guaranteed by any bank and may lose value.

So there are two choices; invest in the PayPal Money Market fund, which is not FDIC insured and could lose value by breaking the buck.  If you invest in the Money Market fund, you receive an interest payment on you monthly balances.

The other option is to opt out of the Money Market Fund, you will not earn interest, and will receive at least some level of protection on your funds.  If you want to opt out, the article outlines the following process.

you can close your PayPal Money Market Fund, and have PayPal keep your funds in an FDIC insured bank by-

  • logging into your PayPal account
  • click “Profile”
  • click “Money Market Fund”
  • click “Close Money Market Fund”

In either case, your safest bet is to regularly transfer your PayPal balances backto your own checking account at your own bank.  Of course, you may still have that to worry about.


The folly of mistaking a paradox for a discovery, a metaphor for a proof, a torrent of verbiage for a spring of capital truths, and oneself for an oracle, is inborn in us.
Paul Valery, 1895
French critic & poet (1871 – 1945)

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