Can someone help explain what PayPal's Money Market Fund is? Is it more like stocks or like a CD?

Question

I signed up for it, but I currently don't have any money in my PayPal account (I usually just transfer money over from my bank account when I need money). What will that do?

Answer 1

I asked my cousin who works for a major financial institution the same question.  Here is what he told me:

"Yeah, this is a money market fund and not an investment, per se. Works more like a bank savings account, but with generally higher rates of interest. It doesn't invest in stocks so your potential returns are limited. Generally, your principal is safe though, with very little to virtually no chance of losing the money you put in.

Having said that, as a money market fund, there are much better options out there. All money funds generally invest in the same types of securities (highly safe short term debt and commercial paper) so really what you're looking for are money funds with the lowest management fees and expenses. This one's fees (1.1% per year) are high for a money market.

The one advantage I saw with this one is that it didn't seem to really have a minimum initial investment. Most funds initially make you put at least $2500 or so to start. So if you're comparing this option to, for example, a bank savings account, it may make some sense.

That is my thorough analysis. Hope this helps."

Answer 2

From my personal experience, it's just like a savings account that pays a higher interest rate than most do.  It is not a stock, you cannot lose the money you have in there.  And it is not like a CD, you do not have to keep your money there for a set term.  You can withdraw your funds anytime you want without a penalty.

I like PayPal's money market account.  I participate in several affiliate marketing and "get paid to" programs online that pay via PayPal.  I keep any money that I earn through these programs there.  I'm not  tempted to mess with it because I usually forget it's there.  And it earns a pretty decent interest rate to boot!