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jdurbin · 03-03-2003, 07:53 AM

I used to work for a bank and I can give you some details. A money market account is a fund that invests in treasury securities and repurchase agreements. Repurchase agreements are short-term IOUs between very large credit-worthy firms. It is possible for a fund to lose money if they do a really bad job of deciding where to invest the funds but it isn't likely. If Paypal is advertising it as a "money market" fund then they are investing in these types of securities and not loaning it to themselves to lower their cost of capital - that would be illegal. In fact, they are probably having a professional investment firm manage the money market fund for the clients (us) and earning a fee on it to supplement their revenue.

I have a Paypal account and I am using the money market option. When someone pays me I use the debit card to get my money out of the account instead of immediately transferring to my checking account. Doing so gives me the 1.5% rebate which helps defray my Paypal fees. When my money is sitting in Paypal's accounts I have the choice of getting nothing on that money or getting the 1.45% money market return. I wouldn't put all my money with Paypal because there are better places for it but I think the money market option is a legitimate way to get a slightly bigger return on my money than just letting it sit there earning zero return. As Undeadlord points out, Paypal is owned by eBay and eBay isn't going to let their reputation get tarnished by letting the Paypal customers get screwed.

03-03-2003, 07:53 AM	#14 (permalink)
jdurbin Registered User Join Date: Jan 2003 Posts: 762	I used to work for a bank and I can give you some details. A money market account is a fund that invests in treasury securities and repurchase agreements. Repurchase agreements are short-term IOUs between very large credit-worthy firms. It is possible for a fund to lose money if they do a really bad job of deciding where to invest the funds but it isn't likely. If Paypal is advertising it as a "money market" fund then they are investing in these types of securities and not loaning it to themselves to lower their cost of capital - that would be illegal. In fact, they are probably having a professional investment firm manage the money market fund for the clients (us) and earning a fee on it to supplement their revenue. I have a Paypal account and I am using the money market option. When someone pays me I use the debit card to get my money out of the account instead of immediately transferring to my checking account. Doing so gives me the 1.5% rebate which helps defray my Paypal fees. When my money is sitting in Paypal's accounts I have the choice of getting nothing on that money or getting the 1.45% money market return. I wouldn't put all my money with Paypal because there are better places for it but I think the money market option is a legitimate way to get a slightly bigger return on my money than just letting it sit there earning zero return. As Undeadlord points out, Paypal is owned by eBay and eBay isn't going to let their reputation get tarnished by letting the Paypal customers get screwed.