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Can You Survive with Just a PayPal Account?

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The digital world offers some alternatives to traditional banking, like PayPal. PayPal is popular. It can be a savings account, a bill pay tool, even a primary line of credit.  

https://www.forbes.com/advisor/banking/paypal-as-bank-account/

You can make purchases, track purchases, get paid, and enjoy FDIC insurance. Forbes Advisor (link above) says several financial services offered by PayPal could be enough to meet the banking needs of some people.

I have a personal story to contribute to this discussion. I tried to open a bank account after I moved from Florida. The bank denied me over a bad ChexSystems report. I was an awful money manager, and I had overdrawn my account. So, I applied for a PayPal account to buy some time. Here is what PayPal did and did not do for me.

Opening an Account Was Easy

All I had to do was apply for an account. There was no credit check, and I was quickly approved. PayPal offered me a Mastercard Debit Card linked to my PayPal account. I had it in a few days.

The PayPal Cash Card gave me several benefits.

  1. I now had an account number and routing number.
  2. I also had the protection of FDIC insurance. A PayPal account alone does not have FDIC protection. However, when a Mastercard links to the account, any funds go into a pool with FDIC protection by the Bancorp Bank.

My debit card allowed me to make purchases anywhere Mastercard was accepted. For online purchases, my Mastercard worked when PayPal wasn’t an option.

It Provided a Place to Deposit My Cash

I may be a cash person, but enough was enough. I did not want to hide my money in a sock or under the mattress. PayPal allowed me to go to a merchant and, for a small fee, I was able to deposit cash into my account.

I Was Able to Have Direct Deposit of My Paychecks

Paying for cashing paychecks was an annoying expense, but PayPal took that expense away. I enjoyed using the account and routing number for my PayPal Cash Card to have my paychecks directly deposited into my PayPal account for free.

Once I had direct deposit set up, I could withdraw cash at any ATM if I ever ran out of money in my sock.

In addition, if I used a MoneyPass ATM, I avoided a service fee from PayPal for my withdrawal.

I was able to get paid by my employer, and other people could pay me, too. I also could pay them. If I performed some side work, people could send money from their PayPal account straight to mine. PayPal even enabled me to customize and send invoices! Likewise, if I lost a bet or owed cash for another reason, I could pay up with PayPal.

Credit Is Available Through PayPal

Buy now and pay later seems to be the mantra of all but the most enlightened financial gurus. PayPal tries to fit itself to the minor credit needs of most people, assisting and not unconscionably taking advantage of them with exorbitant interest rates.

PayPal Credit

This is an online service wherever PayPal is accepted. It allows the privilege of making purchases over $99 and paying for them over time, interest-free if paid off in six months or less.

Pay In 4

You can purchase and pay in four equal payments every two weeks without any interest charges with this option. Note that the first payment is due at the time of purchase. Also, your credit score is not going to get better by using this service.

Cash Back and Rewards

 Do you want 2% cashback on any purchase? PayPal offers a Cash Back credit card without a fee.

The PayPal Extras Mastercard lets you earn points for spending on certain things. You earn three points for every $1 spent on gas and restaurant purchases; you earn two points for each $1 spent on PayPal and eBay purchases.

Finally, all other purchases make one point per $1. You can use Reward Points to get cash, cover travel expenses, buy gift cards, and even purchase merchandise.

Savings

Most people would not think of a PayPal account as a savings account, but it works like one. For average daily balances less than $1,000 on your prepaid Mastercard, PayPal pays interest at an annual percentage yield of 5.0%. The bad news is, when your balance is more than $1,000, the interest rate lowers to 0.5% on the portion greater than $1,000.

Money Management

It is not a big deal, but PayPal has a website where you can view your balance and track transactions. Plus, you can do it from all of your devices.

PayPal sends a text message each time I receive money. I can set notifications to send me an email anytime there is any purchase activity in my account.

A Few More Extras

I made it to the point where I took care of my overdraft in Florida, and the bank was suddenly more than happy to open a checking account for me. I seriously considered keeping my PayPal account alone, but I am old-school and felt better with a traditional account.

I found that my PayPal account worked great in tandem with my checking. When my PayPal balance was over $1,000, I could quickly transfer money into my checking or savings account. If my PayPal account dropped to $0, it automatically pulled from my checking account to cover any purchases I made.

Okay, What’s the Bad News?

I think there is bad news only for conventional banking when it comes to PayPal. I have no doubt PayPal is capturing a portion of traditional banking’s market.

However, PayPal cannot match the comfort factor provided by conventional banking. I like going to the bank. It’s comfortable.

Do you remember the days of standing in a check-out line, groaning a little when Granny took out a checkbook to write a check for her purchase? PayPal supports those frustrated by waiting in a check-out line. PayPal doesn’t provide paper checks. Die-hard check writers will have to go to the bank for a supply.

Finally, PayPal has not yet found a way to provide the range of services offered by traditional banks. If you need a more significant line of credit, like an auto loan or a home mortgage, PayPal cannot help you. If you need help with wealth management or financial advice, PayPal can’t help you with that, either. You might need more than PayPal to survive.

Image credit: Arthon Meekodong

How To Avoid ATM Fees

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Few things burn me more than being charged an ATM fee for withdrawing my own money… so I developed a system that enables me to avoid ATM fees altogether – here’s how I do it.

Use banks with no atm fees

When considering a new bank or credit union, look for one that doesn’t charge ATM fees.  If they do charge fees be sure they have a system in place that allows you to avoid being charged the fees such as belonging to a nationwide ATM network.

Betsy and I use Capital One 360 for our main checking and savings accounts and have been able to completely avoid ATM fees.  Capital One 360 is a member of the All-Point Network of ATMs giving us access to our cash at any Target store nationwide, along with many other locations in every part of the country.  If we need to hit up an ATM we can always find something close.

If you’re interested in Capital One 360, you can read more about their checking accounts here and more about their savings accounts here… or you can read my Capital One 360 review.

Update: Shortly after publishing this article Ally Bank contacted me to let me know that they reimburse all ATM fees our customers incur in the United States, including those charged by other banks!  If you’re interested you can read more about Ally Bank’s Fee-free interest checking here and more about their savings accounts here.  I also endorse them and have noticed they’ve really stepped up their focus on customers over the last few years.

If you are not looking for a new bank then you can employ the final two tactics to avoid or greatly lessen your ATM fees.

Use a cash envelope system

Back in November of 2009 Betsy and I attended Dave Ramsey’s 13 week Financial Peace University course – at our local church – which inspired us to adopt a cash envelope system for several specific budget categories.  For our situation we decided using cash would work best for:

  • Groceries
  • Dining out
  • Entertainment
  • Clothing
  • Miscellaneous

These categories may not be best for everyone so be sure to figure out what works best for you.

We each carry our own cash and manage it in a way that works best for us.  Betsy carries and uses the Dave Ramsey cash envelope organizer that came with our FPU kit, while I stick to a much simpler system of keeping a wad of cash in my wallet and journalling each transaction to keep track of each category.

I only recommend keeping all your cash together if you journal the spending; otherwise you can easily spend much more in a certain category than allotted.  If you’re not going to journal the activity it’s best to keep the cash separate for each category.

Withdraw money once per month

To avoid fees, simply withdraw your cash envelope money once each month rather than hitting up an ATM every time you need money.

Here is a detailed breakdown of how much Betsy and I use for each category:

  • Groceries – Betsy gets $260, Matt gets $100
  • Dining out – Betsy gets $40, Matt gets $20
  • Entertainment – Betsy gets $40, Matt gets $20
  • Clothing – Betsy gets $60, Matt gets $20
  • Miscellaneous – We both get $100

If you do the math you’ll see that we need $760 total, so at the beginning of the month Betsy and I head over to Target and withdraw the entire amount.  You may have noticed that she carries a bit more in several of the categories than I do; that’s because we’re usually together and it works out best for us.  I carry my own grocery money for when I have to run to the store by myself to pick up a few odds and ends.

It’s also worth noting that Capital One 360 has a $1,000 daily ATM withdrawal limit; keep that in mind if you use or plan to use Capital One 360.  Otherwise be sure your cash envelope amount fits within the daily ATM withdrawal limit of your bank.  If the amount needed exceeds the daily limit simply go to the ATM twice each month, once in the beginning of the month and once in the middle.

What tactics do you employ to avoid paying ATM fees?

PerkStreet Cash Back Debit Card

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In a few recent articles (here and here) I mention my new endorsement for the bank PerkStreet. Let’s see what they’re all about so you can determine if they’re worthy of your business.

What is PerkStreet?

PerkStreet Financial offers a personal checking account only. They do not offer personal savings or business checking accounts but are working on implementing them soon.

From their website:

“PerkStreet Financial offers an FDIC insured checking account with the most debit card rewards around. When you use your PerkStreet FinancialSM Debit MasterCard® you can earn up to unlimited 2% cash back, plus up to 5% cash back in popular categories called PowerPerks. No matter how you use your PerkStreet FinancialSM Debit MasterCard®, the money is withdrawn from your checking account. You can earn great rewards without going into debt.”

Today we’ll review the PerkStreet Financial Debit MasterCard.

Cash back debit details and fine print

They claim you can earn over $600 in rewards per year with the only unlimited 2% cash back debit card. They also say you earn 5% cash back in “popular” categories. Let’s break that claim down to see if the benefits outweigh the details of the account.

  • You will earn unlimited 2% cash back for your first 3 months, or if your current balance is $5,000 or greater at the start of the day.
  • After the first 3 months, you will earn unlimited 1% cash back if your current balance is less than $5,000 at the start of the day.
  • Everyone earns 5% PowerPerks in popular categories up to $5,000 in yearly purchases.
  • No credit check needed, but they do pull a ChexSystems report to evaluate if your checking account history has a checkered past (pun intended).
  • The account includes Bill Pay services and Checks, but using these services does not earn rewards. This is important because if you pay your mortgage through their bill pay, you will not earn rewards – but, if you use your debit card to pay the bill, you do. (Please check to make sure your mortgage provider does not charge a fee.)

You will only earn rewards (perks) for non-PIN purchases, so please make sure the transaction is signatory, online, or over the phone. This means you must make credit – not debit – transactions with your debit card.

Questions and Answers to clear the fog.

  • Q: How do we earn the $600 in rewards?
  • A: Making $601 in weekly non-PIN purchases will earn you $625 in perks annually (when you maintain a balance of $5,000). According to the U.S. Bureau of Labor Statistics, the average American household spends $601 per week on purchases that could be put on a debit card, including stuff like utility bills or rent.
  • Q: What do they mean by “unlimited cash back?”
  • A: Many rewards cards cap the cash back amount you can earn, PerkStreet does not. The more you spend (via debit transactions) the more cash back you earn.
  • Q: What are the “popular” categories that earn 5% cash back?
  • A: The popular categories are called “PowerPerks” and they change monthly. Please refer to the PerkStreet blog for the current months PowerPerks.

Notable fees and how to avoid them

I only noticed two fees worth mentioning, the others are standard with any account or uncommon. Let’s take a look.

Inactivity fee

From their website:

“The PerkStreetSM checking account is free to use. You’ll never pay a maintenance fee when you use your account each month. And there are no account minimums, low balance fees or charges to make purchases with your debit card. The fees we do charge are avoidable and all of them are explained here. No tricks, no games, no gotchas. Promise.”

They said “You’ll never pay a maintenance fee when you use your account each month.” After looking into this I see there is an “Inactivity Fee” if you do not do any of the following at least once each month: making a transaction with your debit card, writing a check that clears the account, using Online Bill Pay, initiating a withdrawal or making a deposit to the account.

This fee is insignificant if you’re using the account for rewards because no transactions means no rewards, which defeats the purpose. Basically, use the account at least once each month to avoid the inactivity fee.

ATM fees

From their website:

“You won’t pay any fees as long as you use ATMs within the STARsf® surcharge-free network. If you use an ATM outside this network you will be assessed this fee.”

If you need to pull cash from the account I recommend withdrawing the entire months allotment once at the beginning of each month. This is how me and Betsy fund our cash envelopes, we each get $300 at the 1st of the month and never need to hit an unplanned ATM. It works great.

How to open an account

I opened an account so I could detail the process for you. There were 5 easy steps with little fine print which I found uncommon and refreshing.

1) Identity 2) Contact/Joint 3) Account Options 4) Review 5) Funding

1) Identity

Pretty self explanatory, you enter your name, address, date of birth, and social security number.

2) Contact/Joint

Here you need your driver’s license number, phone number, and email address. You can also open a joint account easily, just make sure you know the social security and driver’s license number of the joint account holder.

3) Account options

The 2 options were overdraft protection and electronic statements. They say, “You must choose electronic statements to open a PerkStreet account.” so that’s more of a requirement than an option so let’s focus on the overdraft protection.

From their website:

Q: What are the standard overdraft practices that come with my account?

A: We authorize and pay overdrafts for the following types of transactions:

  • Checks and other transactions made using your checking account number
  • Automatic bill payments

We do not authorize and pay overdrafts for the following types of transactions unless you ask us to (see below):

  • ATM transactions
  • Everyday debit card transactions

We pay overdrafts at our discretion, which means we do not guarantee that we will always authorize and pay any type of transaction. If we do not authorize and pay an overdraft, your transaction will be declined.

Q: What fees will I be charged if PerkStreet Financial pays my overdraft?

A: Under our standard overdraft practices:

  • We will charge you a fee of up to $25 each time we pay an overdraft.
  • We limit the number of overdrafts you can incur to three per day.

Pretty standard stuff. The next step asks you how you’d like to fund your PerkStreet account.

4) Funding

You must fund your account with at least $25 or the amount specified in your bonus offer up to a maximum of $500. You can do this in two ways:

  • by using your debit / credit card (no cash advance or other fees apply for the first funding)
  • by transferring money electronically from your current checking account using the routing and account number from the bottom of your check.

5) Finish

After you submit your application they say…

“Thank you. Your application is being processed. You will receive an email shortly confirming your application and describing the next steps in opening your account.”

You then receive an email confirming your application. In it they list your information, ask you to review it, and instruct you to call 866-792-2834 with any changes or questions.

If this looks like something you will benefit from you can learn more and open and account here.

Conclusion…

If you already use your debit card regularly for purchases the rewards on this account should pay far greater than the measly interest rates on checking accounts nowadays.

We liked what we saw so we opened an account and are experimenting with the rewards, since they’re the best debit rewards available. Stay tuned for updates on our findings and ask questions by leaving a comment below. As mentioned above, if this looks like you’ll benefit from you can learn more and open and account here. If not, don’t bother.

God bless!

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