How Does PayPal Work In Canada?

PayPal is a service that allows Canadians to transfer money and make payments online. Here's how PayPal works: You sign up for a free account and can send money to and from friends and family in Canada for free.

If you want to send or receive money abroad or make foreign currency purchases, there are fees you should be aware of. We'll walk you through setting up a PayPal account and linking bank accounts or credit cards while explaining what you can use it for.

How does PayPal work in Canada?

PayPal is a popular service that allows Canadians to make purchases or transfer money online. Although it's been around since 1998, it launched in Canada in 2006. As of just a few years ago, there were an estimated 6.4 million active users in Canada alone.

How to buy things with PayPal

If you don't have a credit card, PayPal is one of the most convenient options at your disposal for making purchases online.

To do this, make sure the merchant you're buying from accepts PayPal. Usually, they'll have a bunch of logos somewhere on their checkout page, like this:

You can link your PayPal account to your credit card or connect a bank account to transfer funds to your PayPal.

Some merchants will only accept PayPal, but even if you don't have an account, you can still enter your bank account or credit card information and pay via PayPal in these instances.

How to link your credit card

First, log in to your PayPal account. At the top of the page, in the menu, click the "Wallet" link.

Just under the menu are two buttons – click on "Link a card".

On the next screen, simply add in the information requested and press "Link Card."

And that's it! You'll be able to use your credit card to make your purchase.

You can link Visa, Mastercard, and Amex credit cards, as well as Visa and Mastercard debit cards.

How to link PayPal with a Canadian bank account

To link your bank account, it's a similar process. After logging in and clicking on "Wallet" in the menu, click on "Link a bank."

Choose your bank, but don't fret if you don't see yours – simply search for it instead.

Depending on the bank, you can simply sign in like you would with your online banking. For others, you may need to enter your account details.

You might have a few questions to answer, and once that's done, your bank account will be linked to PayPal.

To fund your PayPal account, click "Summary" in the menu and select "Transfer Money." You can either send money to your bank or add money to your PayPal account.

How to send money with PayPal

PayPal is a popular tool for sending money to others. If you want to send money to someone else, they don't even have to have a PayPal account, depending on where in the world they live.

All you have to do is enter their email, name, username, or mobile number, and you can quickly send funds.

PayPal also has its international money service, Xoom. You can send money directly to someone's bank account or directly for them to pick up, depending on the country where they live.

Setting up PayPal

If you're only vaguely familiar with PayPal (maybe you've heard of it once or twice), here's a full breakdown of how it works so you're not scrambling to get it to work when you need it urgently.

Create a PayPal account

It's easy to make an account and won't take more than a few minutes. From the homepage, look for the "Sign Up" button at the top. From here, you can choose a personal or business account.

On the next page, select "Canada" and enter your email address. Then, enter a confirmation code to finish setting up your account. PayPal will guide you through the steps of linking a bank account or credit card.

Then, you're all set to go!

The homepage also has a QR code you can scan to download the handy mobile app.

Review PayPal's fees

PayPal fees are most often paid for by the seller, much like how credit card processing fees work. However, if you're transferring money, you'll most likely pay charges.

Bear in mind that these only apply to Canada – if you're in another country, they may not be exactly the same.

This isn't an exhaustive list of PayPal fees, but these are the ones you're most likely to run into.

Link your credit card or bank account

It's easy to get your PayPal account up and running. Here are the simple steps to link your credit card:

1. Log in to your account online or in the mobile app.
2. Click on "Wallet."
3. Select "Link a bank or credit card."
4. Manually link a card issued by a bank or credit card issuer.

If using the app, click on "Accounts" instead of "Wallet" and follow the same instructions.

Keep in mind, you can add up to four credit cards if your PayPal account is unverified. Once you verify the account, you can add an unlimited number of cards.

Pros and cons of using PayPal

Before signing up for a personal PayPal account, weigh the benefits and disadvantages of the service.

Pros:

• Easy to use: It only takes a few minutes to sign up and you can quickly send money or make online payments.
• Includes fraud protection: If you make a purchase that ends up being fraudulent, PayPal can help you recover your money.
• Free to send money to family: If you're sending money to personal users in Canada, there are no fees.
• Very secure: PayPal encrypts your financial information, protecting it from would-be thieves.
• Widely accepted: Many merchants accept PayPal, making it a convenient payment option.
• Accessible deals and credit options: You'll have access to buy now pay later plans in addition to cash back offers in the app.

Cons:

• Potential for delays: If you want to accept money and transfer it for free, you're typically looking at a wait of a few days.
• Fees: While transfers between individuals within Canada are free, PayPal tacks on fees for sending or receiving money between countries, businesses, and for using credit cards.
• Potential for account freezes: A common complaint with PayPal is that they might freeze your account or hold your balance if they suspect suspicious activity or account misuse.
• Difficult to track your spending: If you're trying to closely watch your spending, be aware that purchases made using PayPal will show up as "PayPal" on your statement, so you won't be able to easily tell what it was you purchased.
• Targeting from scammers: PayPal often reminds users to watch out for phishing emails and attempts by scammers to access users' personal accounts.
• History of data breaches: PayPal data was allegedly compromised in spring 2025 but denied the allegation. However, the company was hit with a $2 million USD fine in 2022 for failing to comply with cybersecurity regulations.

PayPal vs. credit cards

Paying by credit card and using PayPal each have their own advantages.

• Earning rewards on purchases: credit card
• Not spending more than you can afford: PayPal
• Avoiding fees: PayPal
• Getting insurance: credit card

Using PayPal is like paying with an online debit card. You can't overspend and find yourself in debt, nor will you have to worry about any annual fees. On the other side of the coin, you won't be able to earn any rewards.

You also won't be able to take advantage of other credit card perks like purchase insurance and extended warranty.

Best prepaid credit cards

A prepaid credit card essentially works like PayPal for purchases. You add funds to a card from a bank and use that money to make purchases.

But you've also got the convenience of a credit card. This means you could earn rewards, get extra insurance, and other perks.

If this option interests you, here are some of the best prepaid cards right now.

Other PayPal alternatives

Prepaid credit cards aren't your only option for making online purchases or sending money. Here are a few popular alternatives.

FAQ

What is PayPal, and how does it work?

PayPal is an American fintech company that allows users to send money, receive money, request funds, and pay online for free or for a small fee. PayPal operates around the world.

What are the disadvantages of using PayPal?

Depending on what you're trying to do, you may be charged fees to move money. And, if you want to instantly transfer your money, you will have to pay a fee or wait a few days.

Can someone access your bank account through PayPal?

PayPal touts its strong encryption and 24/7 security services. If your account is compromised and someone gains access to your bank account, it would be the result of a data breach.

What is better than PayPal in Canada?

Some would argue that Wise or a mobile wallet are better options, since they typically charge less in fees and might allow you to move your money faster. Interac is another option, with fees set by your bank.

Are there any risks in using PayPal?

Whenever you're moving money online, providing your bank account, or giving access to your credit card, you are open to risk. Avoid using public Wi-Fi connections to access your sensitive banking and PayPal accounts.

Can you tell me how to send money with PayPal?

It's easy to send money. Just log in to your PayPal account online or in the app. Once you select the option to send money, enter the recipient's email address, name, username, or phone number and specify how much to send.