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Although it’s had trouble with fraud throughout its nearly two-decade history, PayPal is largely safe to use for normal transactions. That said, there are certain things you should know about PayPal’s security and a few extra steps you can take to make sure your money and account remain safe.
Editor’s note: The information and tips in this article are primarily based on US PayPal accounts but should hold for accounts in other countries around the world.
Is PayPal safe and secure?
The simple answer is yes, PayPal is safe, but within limits. Whether you’re sending money to friends or buying and selling products online, PayPal has several industry-standard security features and a bug bounty program to weed out vulnerabilities before it’s too late. PayPal also stores your data on encrypted servers, so the main risk to your account is from phishing and fraud rather than hacks and data breaches.
Although it's generally safe, PayPal is not a replacement for a bank account.
While PayPal is generally safe, you still should not treat it as a replacement for a bank account. In the US, funds are not FDIC-insured, meaning that if PayPal goes out of business, your money goes with it. This shouldn’t be a major concern for normal users, but you should keep your PayPal balance low by transferring funds regularly to a normal bank account if you are worried.
Additionally, although PayPal offers similar services to a credit card company or bank, the level of customer service does not match up. It can take weeks or months to recover lost funds in some cases. Also, PayPal isn’t necessarily under the same legal obligation as banks and other financial service companies.
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With that out of the way, answering the question of exactly how safe PayPal is depends on what you’re using it for. Part of that is due to PayPal’s focus on buyer protection, and part of it is due to the nature of online payments.
How safe is PayPal for money transfers?
For simple money transfers to friends, PayPal is one of the safest platforms out there. In fact, it may actually be safer than normal bank transfers. As long as you don’t make a mistake when entering the amount or email address, you can be absolutely positive that the recipient won’t see your bank account details.
Obviously, some other security concerns aren’t unique to PayPal. For example, using public Wi-Fi connections for financial transactions is never a good idea, as they may be vulnerable to interception. Another concern is scams, which attempt to trick you into sending money to an unknown account or click a link to gain access to your account.
As long as you’re wary of these things and use a bit of common sense, PayPal’s built-in security won’t let you down.
How safe is PayPal for buyers?
When it comes to using PayPal to buy goods and services, it’s one of the safest platforms out there. PayPal’s buyer protection program covers situations where a product is never received or isn’t as described, as well as fraudulent charges that the account holder did not authorize.
PayPal isn't ideal for large purchases.
These policies make PayPal’s buyer security similar to a credit card. However, there are a few limitations to what can be reimbursed in many countries. For example, purchases of cars, large machinery, and custom-made items are often exempt. You should review the full policy for your country, but the main takeaway is that PayPal isn’t ideal for substantial purchases.
Even so, PayPal is a safer way to send money than Western Union or direct wire transfers. Potential scammers can’t glean any financial information from a PayPal transfer, making it a great choice for buyers looking for an extra level of privacy and security.
How safe is PayPal for sellers?
For those looking to use PayPal to sell goods and services, the story is more complicated. PayPal clearly favors buyers in online transactions, and this naturally comes at the expense of sellers.
PayPal does have a seller protection policy, but it’s significantly more restrictive than its buyer counterpart. While legitimate business owners who are willing to work with customers are unlikely to encounter significant problems, there are some situations where sellers may feel less than protected.
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Sellers looking to use PayPal should only ship to verified addresses and require proof of delivery. This will prevent any fraudulent claims that goods were not delivered. Keeping a running record of communication and agreements with a customer will also keep PayPal on your side in any potential disputes.
When PayPal does receive an eligible complaint from a buyer, the funds in question may become locked and unavailable in the seller’s account. However, this doesn’t mean it’s immediately returned to the buyer; if the dispute is decided in the seller’s favor, the funds once again become available.
PayPal security: Tips to secure your account
Keeping on top of your PayPal account security should be a concern for both buyers and sellers, so we’ve put together a short list of tips to keep your money safe. Bear in mind that there is no way to eliminate the risk of data breaches for even the most diligent users, but you should still try to mitigate that risk as much as possible.
Enable two-factor authentication
One of the easiest ways to keep your PayPal account safe is to enable two-factor authentication. It’s disabled by default, but PayPal’s system is compatible with various 2FA apps, including Google Authenticator, Authy, and others.
To turn it on, log into your account and navigate to the Settings page. Switch to the Security tab, then click 2-step verification. Follow the on-screen steps to set up a 2FA app or mobile number. Two-factor authentication can be a pain when logging in often, but it goes a long way toward securing your PayPal account.
Use credit cards instead of debit cards or bank accounts
Attaching a bank account or debit card is one of the easiest ways to add money to your PayPal account, but you should avoid it if possible. Attaching a credit card achieves the same result but provides an extra level of security.
Most importantly, it eliminates the possibility of bad actors using PayPal’s auto-withdrawal feature to drain the money from your bank account. Plus, fraudulent charges can be disputed with the credit card company in addition to PayPal itself, providing an extra layer of fraud protection that you wouldn’t get with a bank account or debit card.
Keep your device and software up-to-date
Whether you’re using a mobile device or a computer, make sure the device and software you’re using to access PayPal are up-to-date. Updates nearly always contain fixes for security holes that could leave your account vulnerable.
If you want to take your PayPal security even further, you can also use a dedicated device for PayPal transactions. Don’t use this device for anything else (no web surfing, no social media, no apps, etc.), and it should offer nearly bulletproof protection for your account.
Don’t use PayPal on public Wi-Fi
One of the few situations where PayPal isn’t safe, even with a dedicated device, is while connected to public Wi-Fi connections. Even if you’re checking your account balance and not transferring money, it may be possible for outsiders to decipher your password and access your account.
If you absolutely must check your balance while away from home, turn off Wi-Fi and use mobile data instead.
Only deal with verified buyers/sellers
Both buyers and sellers should be wary of unverified accounts, as they may be more prone to fraudulent charges and scams. Just about anyone can create a PayPal account in a few minutes, but verifying their identity and address opens them up to all kinds of legal troubles.
In the United States, verifying your account means linking an address (with a bank statement or utility/credit card bill) and a Social Security number.
Be wary of email links and shipping labels
Two of the most common PayPal scams rely on unsuspecting users forgoing due diligence in email communications. Whenever you receive an email claiming to be from PayPal, be sure to double-check that it truly comes from PayPal, and use your browser or phone to navigate directly to your account instead of clicking on links contained in the email itself.
Another common PayPal email scam targeting sellers involves sending a fake shipping label via email. The buyer can then claim that they never received the item and request a refund. To avoid this, sellers should always ship directly through reputable postal services to verified addresses and always get an online tracking number and proof of delivery. For high-value items, you might also want to consider requiring a signature upon delivery.
Monitor your account
Our final tip to keep your PayPal account safe is one that even the most casual users need to keep in mind. No matter how much money you have in your PayPal account, you should regularly check it and make sure there aren’t any unexpected transactions.
This is because bad actors will frequently make a few small purchases to test out a newly acquired account. If they’re successful, they’ll move on to large purchases that quickly drain your bank account or put you in debt. Disputing these claims might get you your money back, but it will cost you countless hours, headaches, and stress. It’s best to nip it in the bud before things get out of hand.