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Plain-English summary
The PayPal User Agreement contains several clauses that may pose risks to users. Funds held in both personal Balance Accounts and business accounts are generally unsecured claims against PayPal and are not FDIC insured (risk_flags-1, risk_flags-5). Users will not earn interest on funds held with PayPal (risk_flags-2, risk_flags-6). While pooled funds are invested, users have no ownership interest in these investments and funds are not secured by them (risk_flags-3). Although funds are held separate from corporate funds, they are still not FDIC insured in bankruptcy. Additionally, users may be unable to close their accounts under certain conditions. The terms also prohibit using currency conversion for speculative trading, with potential transaction holds or reversals (gotchas-3).
90% confidence
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Risks to You
2 findings
Critical issues that pose significant risk to you.
high90% confidence
No Ownership Interest in Investments Made with Pooled Funds
PayPal combines your funds with those of other users and invests them, but the claim against PayPal for your funds is not secured by these investments, and you do not have any ownership interest in them.
Why it matters: While PayPal invests pooled funds, your money is not secured by these investments, and you have no legal or beneficial ownership interest in them. This means you don't benefit from any investment gains and bear the risk if the investments lose value.
PayPal combines your PayPal funds with the PayPal funds of other PayPal users and invests those funds in liquid investments in accordance with state money transmitter laws. PayPal owns the interest or other earnings on these investments. However, the claim against PayPal represented by your PayPal funds is not secured by these investments and you do not have any ownership interest (either legal or beneficial) in these investments.
The required identifying information is:, paragraph 16 · Citation strength: strong
high95% confidence
Unsecured Claims Against PayPal for Funds Held in Personal Balance Account
Funds in your Balance Account (for personal accounts) and any funds not yet transferred to a linked bank account or debit card represent unsecured claims against PayPal and are not eligible for FDIC pass-through insurance, except when PayPal acts as an agent and custodian for funds placed in Program Banks.
Why it matters: Most funds in your personal Balance Account or those not yet transferred to a linked bank account/debit card are unsecured claims against PayPal and are not FDIC insured. This means that if PayPal fails, your funds might not be protected, and you could lose them.
Except when PayPal acts as your agent and custodian to place funds in one or more banks insured by the Federal Deposit Insurance Corporation (FDIC) that we choose in our discretion (" Program Banks "), as provided below, any balance in your Balance Account and any funds sent to you which have not yet been transferred to a linked bank account or linked debit card if you do not have a Balance Account, represent unsecured claims against PayPal that are not eligible for FDIC pass-through insurance.
Personal accounts, paragraph 7 · Citation strength: strong
Data Use and Sharing
4 findings
How the service collects, uses, and shares your data.
medium90% confidence
Payment Method Information May Be Updated Without User Action
If your payment method information changes, PayPal may update it using information and third-party sources available to them without any action on your part.
Why it matters: PayPal may automatically update your payment method details using external sources if they change, potentially leading to charges on an updated card or account without your direct input.
Please keep your payment method information current (e.g., credit card number and expiration date). If this information changes, we may update it using information and third-party sources available to us without any action on your part.
Link or Unlink a Payment Method, paragraph 3 · Citation strength: strong
medium90% confidence
Consent to Obtain Credit Report for Business Accounts
By opening a business account or converting a personal account to a business account, you consent to PayPal obtaining your personal and/or business credit report from a credit reporting agency at account opening and whenever they reasonably believe there may be an increased level of risk associated with your business account.
Why it matters: When you open or convert to a business account, PayPal can access your personal and/or business credit report at account opening and anytime they perceive an increased risk.
You also consent to PayPal obtaining your personal and/or business credit report from a credit reporting agency at account opening and whenever we reasonably believe there may be an increased level of risk associated with your business account.
Business accounts, paragraph 12 · Citation strength: strong
medium90% confidence
Requirement to Provide Tax ID or Information May Lead to Account Holds
If you do not provide the requested tax identification number and/or other tax-related documentation or information to PayPal, or keep it up to date, you may be subject to account holds or limitations and withholding Taxes at applicable rates on gross payments received.
Why it matters: Failure to provide or update your tax identification number or other tax-related information may result in your account being held or limited, and Taxes being withheld from your gross payments.
We may request that you provide PayPal with your tax identification number and/or other tax-related documentation or information. If you do not provide the requested information to PayPal or keep documentation up to date in your PayPal account, you may be subject to account holds or limitations and withholding Taxes at the applicable rates on gross payments received.
Information reporting, paragraph 1 · Citation strength: strong
medium90% confidence
Withholding Taxes May Be Non-Refundable
If PayPal remits withholding Taxes to the appropriate tax authorities, they may be prohibited from refunding any amounts to you once these have been sent.
Why it matters: Once PayPal sends withheld Taxes to the tax authorities, you may not be able to get these funds back, even if there was an error.
PayPal will remit any such withholding Taxes to the appropriate tax authorities, and you acknowledge PayPal may be prohibited from refunding any amounts to you once these have been sent to the appropriate tax authorities.
Information reporting, paragraph 1 · Citation strength: strong
Cancellation and Renewal
1 finding
Details on how to cancel the service, automatic renewals, and associated terms.
low90% confidence
Continued Liability After Account Closure
You may close your PayPal account at any time without cost, but you will remain liable for all obligations related to your PayPal account even after it is closed.
Why it matters: Even after closing your account, you are still responsible for any outstanding obligations related to your PayPal account.
You may close your PayPal account and terminate your relationship with us at any time without cost, but you will remain liable for all obligations related to your PayPal account even after the PayPal account is closed.
Closing Your PayPal Account, paragraph 1 · Citation strength: strong
Other Gotchas
2 findings
Potentially overlooked or tricky clauses.
medium90% confidence
Currency Conversion Spread Applies to Conversions
When PayPal converts currency, it will be completed at the transaction exchange rate set by PayPal, which includes a currency conversion spread applied and retained by PayPal.
Why it matters: When exchanging currencies through PayPal, you will incur a fee through a 'currency conversion spread' that is added to the base exchange rate, meaning you won't receive the exact market exchange rate.
If PayPal converts currency, it will be completed at the transaction exchange rate we set for the relevant currency exchange. The transaction exchange rate is adjusted regularly and includes a currency conversion spread applied and retained by us on a base exchange rate to form the rate applicable to your conversion.
Restrictions on transfers or withdrawals from PayPal accounts, paragraph 14 · Citation strength: strong
high95% confidence
Prohibition on Speculative Currency Trading
You may not manage or convert multiple currencies for speculative trading purposes, conversion arbitrage, conversion options, or any other activity that PayPal determines is primarily for gaining money based on currency conversion rates. PayPal may hold, cancel, or reverse any transaction that violates this policy.
Why it matters: You are prohibited from using PayPal's currency conversion features for speculative trading or other activities aimed at profiting from exchange rate changes. Violating this policy could lead to PayPal holding, canceling, or reversing your transactions, potentially resulting in financial losses or account restrictions.
You may not manage or convert multiple currencies for speculative trading purposes, conversion arbitrage, conversion options, or any other activity that PayPal determines is primarily for the purpose of gaining or making money based on currency conversion rates. PayPal may hold, cancel, or reverse any transaction we determine to violate this policy.
Restrictions on transfers or withdrawals from PayPal accounts, paragraph 12 · Citation strength: strong
Strong Protections for You
3 findings
Consumer-friendly clauses that offer strong benefits.
Protection90% confidence
Refund for Unclaimed Payments to Friends or Family
If you send money to a friend or family member and they decline to accept it or do not claim it by opening an eligible PayPal account, the money (including any fees you were charged) will be refunded to you.
Why it helps: If your friend or family member doesn't accept the money you sent, or doesn't open an account to claim it, your funds will be returned to you, preventing loss of funds.
If the person to whom you are sending money does not have an eligible PayPal account, they can claim it by opening an eligible PayPal account. If they don’t claim it, it will be refunded to you.
Refund for Purchases if Seller Doesn't Open Account
If you purchase something from a seller who accepts PayPal, and that seller does not already have a PayPal account, they can claim your payment by opening one. If they don't open a PayPal account within 30 days, your purchase will be refunded.
Why it helps: If a seller doesn't open a PayPal account to claim your payment within 30 days, your purchase will be refunded, ensuring you don't lose money on transactions with new sellers.
If the seller you are purchasing from sells goods or services and that seller does not already have a PayPal account, they can claim your payment by opening a PayPal account. If they don't open a PayPal account within 30 days, your purchase will be refunded.
Fees for Sending Money to Friends and Family, paragraph 14 · Citation strength: strong
Protection95% confidence
Right to Advance Notice for Varying Automatic Payments
If you have authorized a seller to take payments from your PayPal account on a regularly recurring basis, and if such payments will vary in amount, you have the right to advance notice of the amount and date of the transfer from the seller at least 10 days before the transfer is made. You may also choose to receive this notice only when the amount falls outside a range established with the seller.
Why it helps: You receive advance notice of varying automatic payment amounts and dates, giving you time to manage your funds and prevent unexpected charges. You can also customize notification thresholds.
If you have given advance payment authorization to a seller that permits a seller to take or receive payments from your PayPal account on a regularly recurring basis (for example, every month or otherwise on a routine billing cycle), and if such payments will vary in amount, you have the right to advance notice of the amount and date of the transfer from the seller at least 10 days before the transfer is made. If the seller provides the option, you may choose to receive this advance notice only when the amount of your automatic payment will fall outside a range established between you and the seller.