Two questions about PayPal

Factual Questions
1
  1. Why don’t they take AmEx?
  2. I thought that they made money by investing your money until it is withdrawn…now they are paying 5.2% interest on your balances…I don’t see a revenue stream…how do they stay in business (since it obviously isn’t a charity)?
2

I don’t know for sure, but I will take some swings at it.

  1. Because they couldn’t come to terms with AmEx, I would imagine. Vendors pay a fee to the credit card companies for the privilege of accepting those credit cards (usually a percentage of sales, I believe). As in all things where money is an issue, exact terms are negotiable. (This is also why the government doesn’t take Visa for those things that can be paid with credit cards, the government and Visa couldn’t come to terms (at least that was the case a while ago and it may have been MasterCard and not Visa)).

  2. PayPal will make money on the float. That gap between when the payment is put into your PayPal account and the moment you take it back out. If PayPal’s balances tend to fluctuate on a short cycle (perhaps deposits build up during the day but most people empty the account every morning) then this is going to seriously limit PayPal’s ability to maximize the float. As PayPal can reduce the swings in that cycle the company can start to put that money to more profitable use.

If PayPal is offering 5.2% on your balance it must mean that they feel they will eventually be able to make much more off of that money than they will be paying out to you. Just keep in mind that PayPal is not a bank (so far as I know) and your money with them is not FDIC insured (however, when they in turn deposit your money into their bank account it is insured but to them, not to you). If PayPal goes under you will have to stand in line with all the other creditors.

3

I don’t know about that Ob, because each paypal acct is insured to $100,000.

As to why they don’t take AE, why dont you ask them? Lots of times businesses only take Visa OR AE, remember the Olympics?

4

PayPal is owned by a bank in Colorado.
Banking services provided by First Western National Bank, Member FDIC

As such, it gets Visa and MasterCard rights.
It actually sells those loans and collects the interest.

AmEx is not owned by the issuing banks, but by a separate company. Thus the banks are in direct competition with AmEx.