PayPal Canada is a popular service for sending money to friends, family, and for paying for things online.
It works with both bank accounts and credit cards, and can be seen as a convenient way to send money back and forth. This includes accepting payments from others, sending payments, or making purchases using a linked bank account or credit card.
In this article, we'll take a look at everything that you need to know about PayPal, as well as how it compares to using some of the top credit cards in Canada.
Key Takeaways
- PayPal Canada is a service that you can use to transfer money or buy things online.
- Usually, it's better to use a credit card as you can get rewards and have coverage with purchase insurance and extended warranty.
- Prepaid credit cards like ones offered by EQ Bank and KOHO earn rewards with no risk of overspending.
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Getting started with PayPal Canada
If you're only really familiar with PayPal (in the same way you may have been "familiar" with Google Analytics when asked about it in a job interview), here's a full breakdown of how it works so you're not scrambling to get it to work when you need it urgently.
How to 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.
What are PayPal Canada's fees?
PayPal fees are most often paid for by the seller, much like how it works with credit card processing fees.
But for a complete picture, here are the fees that PayPal Canada charges. Bear in mind that these only apply to Canada – if you're in another country, they may not be exactly the same.
| Fee description | Amount |
|---|---|
| Sending a domestic transfer from your PayPal balance or bank account | No fee |
| Using a credit card to send a domestic transfer | 2.9% + $0.30 |
| Sending international transfers from a PayPal balance or bank account | $2.99 or $4.99. |
| Sending international transfers using a credit card | 2.9% + $0.30 cents + another fee of either $2.99 or $4.99 |
| Instant withdraw to a bank from a personal account | 1.75%, max fee of $25 |
| Accepting credit card payments | 2.9% + $0.30 |
This isn't an exhaustive list of PayPal fees, but these are the ones you're most likely to run into.
So as you can see, there are no fees for making purchases, or receiving a money transfer from someone else.
How to use PayPal for purchases
So what can PayPal be used for in Canada? There are 2 things people will use it for – making purchases online and sending money to others.
How you can use PayPal for purchases
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 either link your PayPal account to your credit card or link your bank account and transfer funds over.
Some merchants will actually only accept PayPal, but even if you don't have an account, you can still enter in your credit card and pay via PayPal in these instances.
How to link your credit card
First you need to log in to your PayPal account. At the top of the page in the menu click the "Wallet" link
Just under the menu are 2 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".
You'll first have to choose your bank. The major banks are listed, 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 in your account details.
You may have a few questions to answer, and once that's done, your bank account will be linked to PayPal.
To get your PayPal account funded, click "Summary" in the menu, and click transfer money. You can either send money to your bank, or add money to your PayPal account.
Simply follow the steps to add funds to your account.
Sending money to someone else using PayPal
PayPal is an excellent tool to send 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 in their email, name, username, or mobile number, and you can quickly send money to them.
PayPal also has their international money service Xoom. You can send money to someone either directly to their bank account or for pickup, depending on the country.
How PayPal compares to credit cards
Paying by credit card and using PayPal both have their own advantages. Here's a quick comparison of the two if pitted head to head. Just note that this doesn't include when you use your credit card through PayPal, only for using a linked bank account or debit card.
| Feature | PayPal | Credit Card |
|---|---|---|
| Earn rewards on purchases |  |
|
| Can't spend more than you can afford | |
|
| No fees to pay | |
|
| Includes purchase insurance | |
With PayPal, you can think of it as using 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 also 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.
PayPal, however, may be a little more secure as the data is all encrypted and you'll be notified if anything changes on your account (like when a purchase is made or your bank/credit card are changed).
Prepaid credit card alternatives to PayPal
A prepaid credit card essentially works the same as 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, since on the surface, you use them like you would 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, one from EQ Bank and a KOHO Mastercard.
| Prepaid Credit Card | Earn Rates | Annual Fee | Apply Now |
|---|---|---|---|
| EQ Bank Card | * 0.5% cash back on all purchases |
$0 | Apply Now |
| KOHO Extra Mastercard | * 1.5% cash back on groceries, restaurants, and transportation * 0.25% cash back on all other purchases |
$144 | Apply Now |
1. Best prepaid credit card in Canada with no foreign exchange fees
When it comes to prepaid cards, not many of them come with rewards, but the EQ Bank Card doubles up, earning you both when you spend and when you save.
When you buy something, you'll earn 0.5% cash back on all purchases, but for all the money that you have in your account, you'll earn 3.3% interest. No matter what you decide to do with your money, you'll be coming out more ahead than you would with some prepaid card with no rewards.
And if you're spending in currencies other than Canadian dollars, are taking a trip overseas, or find yourself in the land of the free and home of the Whopper, you'll save the 2.5% foreign exchange fee that most other credit cards charge.
All of these benefits come to you free. That's right, no annual fee on this card.
2. Best premium prepaid credit card
$100 GeniusCash + Up to 1.5% cash back on purchases + Lower annual fee.*
The KOHO Extra Mastercard is the more deluxe version of the KOHO Essential Mastercard. This gives you boosted earn rates for both spending and saving, all to the tune of:
- up to 2% in purchases, and
- 2.5% on your balance.
Foreign exchange fees are completely waived with this card as well. It's certainly an upgrade, but you'll have to keep in mind that there's a $12 monthly fee.
The bottom line on Paypal Canada
For an alternative to credit cards for online shopping, PayPal is one option to consider.
Plus, it's also a good service to use for transferring money to others.
Do you use PayPal? What are your thoughts on the service?
Let us know in the comments below.
FAQ
How does PayPal Canada work?
Essentially, PayPal is a payments services provider. It can be used to make purchases, send money to others, and for merchants it's an easy way to accept credit cards.
How does PayPal compare to credit cards?
When comparing PayPal and credit cards, your PayPal account can be either loaded from a bank account or linked to your credit card. These funds are used to make purchases online. Generally speaking, PayPal is safe to use due to its encryption, but you'll lose out on any rewards and credit card perks like extended warranty and purchase insurance.
Can PayPal be used to make purchases?
Yes, PayPal can be used to make purchases, assuming the merchant accepts PayPal.
Does PayPal have an app?
Yes, PayPal does have an app that can be used for managing accounts.
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