Note: Since this article went to print, PayPal
has reduced their sign up bonus from $10 to $5. PayPal now insures each account up to $100,000 against unauthorized transactions and PayPal is now offering Business accounts. — Ed.
Speaking of credit cards... I came across a new service on the Internet recently that I think could become a real must-have. It's called PayPal.
The Internet lets us instantly send messages to each other, we can send sound clips back and forth, pictures, movies, about the only think that can't be transmitted with ease is money. I live in Texas and Al Gordon is on the East Coast. If I owed him $6.83 I'd have to mail him a check or stuff some cash in an envelope to pay up. The PayPal folks think it would be nifty if I could just zap the money directly from my computer to Al's and that's just the type of service they've set up.
With PayPal you are able to "beam" money from one person to another using only email or a hand-held device like a Palm Pilot. Keep in mind that others have tried various online-payment systems that didn't appeal to consumers and fell by the way side, but we think PayPal is on the right track. Here's how it works.
You send money by charging your credit card, I send Al that $6.83 and PayPal charges my credit card for that amount just as if I were purchasing something from a merchant (the minimum credit card charge is $5 but the minimum I can beam someone is $0.01, that is, one cent). The money is held by PayPal (more on this in a moment) and Al is notified via email that he's $6.83 richer. He can then have PayPal send him a check, or do a direct deposit to his bank account.
No fees, no charges, Al never sees my credit card information. (Note: while PayPal may not charge for direct bank deposits your bank might charge you to receive one, so check with your bank first. -- Ed.) When you "beam" the money no credit card information is sent to the beam-ee, they just get a message that some money was "beamed" to them and that they should collect it.
PayPal simply charges the beamer's account (your credit card actually, unless you have a positive balance in your PayPal account) and deposits/holds it in the other person's PayPal account.
This "holding" of the funds is how PayPal makes their money. PayPal collects the interest earned on the money between the time they charge your credit card until the recipient collects their money. This is called the "float." Take that $6.83 I beamed to Al. PayPal gets the money from my credit card that day. Al is notified and let's say he requests a check right away. The money sits collecting interest for several days while the check is cut and winds its way to Al via U.S. postal mail. Or say Al just decides to leave the money in his PayPal account in case he needs to beam a few bucks to someone. Multiply the float by thousands or tens of thousands of users and you're talking about some serious bucks. The $5.00 minimum credit charge figures into this as well. Say your PayPal balance is zero and you want to beam $0.98 cents to someone. Your card is charged the minimum $5.00, $0.98 is beamed, and your PayPal account balance is $4.02.
As you can see it's really in PayPal's interest (sorry for the pun) to get as many people using their service as quickly as possible. They want people signed up yesterday and they're willing to pay you to do just that. When you sign up as a new customer PayPal credits your account with $10. You can request a check right then or you can play around with the free money by beaming it. We'll admit, we've not requested checks, but we have been beaming loose change back and forth like crazy. Here in the TNPC Underground Labs the phrase "bet you a nickel" has taken on a whole new meaning.
The PayPal service is run by the Nokia-funded Silicon Valley startup Confinity Inc., and is partnered with Deutsche Bank, giving them some credibility and they have a no-nonsense security and privacy statement posted on their Web site.
In addition to the $10 that PayPal is giving each new user who signs up, they offer $10 to the PayPal subscriber who referred them (limited to 100 referrals). Meaning if you refer 100 of your closest friends you could pocket a cool $1,000. After you register with them they will give you a special address to send to your friends offering them the same deal we've described here.
Keep in mind that like all Internet ventures you should exercise
caution and always read the fine print, but we've been playing
with PayPal for a couple of weeks now and are still enthused with
it. If you're over 18, a U.S. resident, and have a valid credit
card you can get your $10 dollars when you sign up for PayPal via
the TNPC link provided below (and yes, we'll get $10 for
referring you. KA-CHING!)
http://www.TheNakedPC.com/paypal.html
