PayPal as a Savings Account
I have had a PayPal account for as long as I can remember. I actually opened my first account in August of 2000, back when eBay and online payments were just in their infancy and PayPal gave you $5 just for signing up. Obviously, a lot has changed since then, and they have added a lot of new features. But one of my favorite features that has been there all along as been the PayPal Money Market Account.
When you have funds in your PayPal account, you can choose to have your balance invested in their Money Market Fund. During the early years, the return was only around 2%, but throughout 2006 and 2007, it was at a pretty constant 5%. As I’ve gotten out of debt and have been building up an emergency fund, I’ve looked around at what traditional banks offer, and haven’t found anything yet that could beat my PayPal account. I’ve been accumulating my savings there, and during 2007, I earned almost $1000 in dividends from the fund.
Since late last year, though, the rate has dropped pretty steadily from an all-time high of around 5.2% and is down now to only about 3.67%. (see this chart) That puts it about on par, or slightly below what the competition is offering. If it drops much further, I might consider changing to a different bank.
