PayPal’s surprise high yield
Add comment June 13th, 2006
Update: PayPal’s rate is now 4.82%.
If you have any money in your PayPal account, you might want to think twice before withdrawing them. They are earning a surprisingly high interest rate. Currently 4.73%. This is one of the highest rates for money market accounts that can be opened without minimums and no fees. The only one currently higher than that and one that doesn’t have any fees, restrictions and its minimum balance is $1, is Amboy Direct’s premium savings with its 4.75% interest rate. I also like Citibank’s e-savings, but Citibank does require opening the EZ Checking in addition with a minimum of $1500 to avoid fees.
PayPal has been around for a long time and is mostly used to purchase or sell items at online auctions. It is really easy to open an account there. All you need is either a credit card, debit card or a bank account. It is free to open it, free to add funds, free to withraw funds in US banks, free to send money and free to receive money up to the $500 limit. There are 3 account tiers: personal, premier and business. To receive money without limits, you’d need either premier or business account and the fees for that are 2.9-1.9% depending on the amount + 0.30 per each transaction.
What are the drawbacks? This money market fund is not FDIC insured, but that would not worry me. The drawback I would be more concerned about is the possibillity of easily spending the money on online auctions. Perhaps having a higher balance might make you want to spend more. Personally, I use ebay a lot and pay with paypal.