Started in San Jose, California, in 1998, PayPal is an online payment system that allows its members to send and receive money online as well as personal mobile devices, using bank accounts and credit or debit cards. The financial transactions can be personal, such as sending emergency money to a college student, or can be commercial, such as making an online purchase or paying a business invoice. The company touts its method as safe because users don’t have to reveal their financial information during a transaction; instead, it's stored in PayPal’s system with its online security protections.
While you don't need a bank account to use PayPal, you can link any U.S. savings or checking account to your PayPal account.
You don’t need a bank account to set up a PayPal account; you can send money via PayPal with a credit or debit card, but one of the parties – the sender or the receiver – will be charged a fee when you send money this way. You avoid this fee when you send money to friends and family in the United States through a verified, linked bank account. The only other way to avoid this fee is if you have sufficient funds in your PayPal account for the amount you’re sending, or if you charge the receiving party the fee when you initiate the transaction. Online purchases using PayPal are also free when the funds come from a bank account through PayPal.
Odds are that if you have a checking or savings account through a U.S. bank, you can link it to your PayPal account. You need to know the bank’s ABA routing number, sometimes called a routing transit number. This is the unique identifying number of your state or federally chartered financial institution assigned to it by the American Bankers Association, or ABA. Look for the nine-digit number at the bottom left of your check. It will also be on your savings account deposit ticket. If you’re unsure of the number, call your bank or look on its website. You also need your account number, found just to the right of the ABA number.
The Linking Process
Begin linking your bank accounts to PayPal by logging in and clicking on "Profile." Select “My Money” and “Bank Accounts.” Indicate whether it’s a checking or savings account, and then enter your routing and account numbers. PayPal has two ways to verify this information: If you bank online, it attempts verification by prompting you with online security questions. If successful, verification is almost immediate and your bank account is linked. If the online verification doesn’t work, PayPal will send two small deposits of less than $1.00 to your bank account. This can take 2-3 days. When you see the deposits, log back into your PayPal account and verify the exact amounts.
Your bank must be in the U.S. to link to PayPal, and the name on each account must match. PayPal may allow one bank account to be linked with two PayPal accounts. For example, if you and your husband each have a PayPal account, you could both link one joint checking account.
PayPal admits that its confirmation processes don’t work with a small number of U.S. banks, but it does work with most of them. If confirmation fails, you can still transfer money from PayPal to the bank – you just can’t add money to PayPal from the unverified bank. You can always send money via PayPal with a credit or debit card, inputting your card information each time, or linking your cards to PayPal in the same manner as bank accounts.
- PayPal Press Center: About PayPal
- PayPal: Common Questions
- PayPal: How Do I Link a Bank Account to My PayPal Account?
- PayPal: How Many Bank Accounts May I Add to My PayPal Account?
- American Bankers Association: ABA Routing Numbers
- PayPal: What Are the Fees for PayPal Accounts
- PayPal: Can One Bank Account be Used on Two Different PayPal Accounts?