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Post Info TOPIC: Why It's Time to Move Your PayPal Balance


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Why It's Time to Move Your PayPal Balance


Why It's Time to Move Your PayPal Balance

 

Investors in online payment site PayPal's money market fund will soon have to find somewhere else to stash their cash.

PayPal, a unit of eBay, filed forms with the Securities and Exchange Commission Thursday announcing its intention to shut down the fund, which allowed PayPal accountholders to invest money from their accounts at a rate of $1 per share. As of Thursday, the fund held a collective $471 million and had returned 0.04% to investors so far this year. PayPal is no longer taking new shareholders for the fund, and will redeem all shares to current shareholders' regular site accounts by Aug. 1 if they don't cash out sooner.

"Due to market conditions, financial advantages of the money market fund have diminished for our customers," said a PayPal spokeswoman. Advantages for the company have diminished, too. Although the fund's 0.04% return placed it among the top retail money funds, according to iMoneyNet, PayPal was running the fund at a loss to maintain positive returns for its investors. (While the fund shows a 0.22% expense ratio, its expense ratio before the waivers was actually 0.87% last year.) It's a problem plaguing the entire money market industry amid low interest rates that rarely eclipse fees, and declining assets as consumers move money out of such funds and into FDIC-insured accounts.

PayPal's fund closure is beneficial for shareholders, who weren't getting the best deal anyway, says Greg McBride, the senior financial analyst for Bankrate.com. "Now you can go put it somewhere where it can earn something," he says. "You're giving up more than a full percentage point [in interest] relative to a bank savings account." The top online savings and money market accounts are offering upwards of 1.10%, and some high-yield checking accounts up to 6% interest for consumers who can meet requirements such as a regular direct deposit and a set number of debit card purchases each month.

PayPal account users who didn't invest in the fund aren't affected, but it's a good nudge for them as well. At the end of the first quarter, consumers kept roughly $2.6 billion in interest-free bank accounts with the site. (The customer agreement you sign lets PayPal pool your funds to place in FDIC-insured accounts and collect the interest.) With quick transfers from a linked bank account, there's little reason to keep much more in your zero-interest site account than you need for planned purchases, McBride says.

Ari Weinberg contributed to this article.



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Exposing the sleazery of ebaY and PayPal

 



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Losing Interest in PayPal

The days are numbered for the PayPal Money Market Fund.

PayPal parent eBay (Nasdaq: EBAY  ) will shut down the interest-bearing vehicle by the end of next month, as high costs to maintain meager interest-income disbursements are apparently no longer worth it for the marketplace specialist.

Accountholders won't have to do anything when the fund bites the dust. The money will simply be automatically transferred back into the traditional PayPal account balance.

The fund is yielding only a negligible 0.06%, and many PayPal users tend to withdraw their outstanding balances anyway, so this closure probably isn't going to be seen as a big deal. As big as PayPal is, there were only $471 million in assets in the fund as of last week. And running an interest-bearing service like this doesn't come cheap: PayPal was subsidizing most of the 0.87% expense ratio just to keep generating a positive return for its users.

At least PayPal can afford to simply throw in the towel. Charles Schwab (Nasdaq: SCHW  ) had to absorb more than $200 million in additional money-market management-fee waivers last year. Discount brokers can't afford to ignore the interest-bearing potential of idle balances, even if they don't market the services aggressively.

In other cases, payouts are dwindling.

 

 

continues with comments section...



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Exposing the sleazery of ebaY and PayPal

 



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Anyone still using Paypal after the numerous policy changes as of late such as holds for everyone, 'secret' or undisclosed reasons for holds, linking, limiting, requiring bank account numbers to make a purchase with credit card etc, you need to seriously think  about what is going on behind the scenes.

These changes are not 'normal' in any way shape or form

I strongly suggest closing your accounts (both ebay and paypal) down right away, and doing whatever it is you need to to protect yourself/CC & bank accs, lest some new 'glitch' or policy wipes out your financial life and happiness in a nanosecond.

Remember, Paypal answers to NO ONE!

 



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Exposing the sleazery of ebaY and PayPal

 

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