WARNING: You could lose your Paypal Money due to WALL STREET Crisis!!!!

As you might have heard about the Financial Crisis on Wall Street, this can DIRECTLY affect your paypal money!!!!


As you might know, when you get money via paypal it actually goes into a Money Market Mutual Fund which is NOT INSURED and not guranteed to be worth $1 per share. You are NOT GURANTEED to get $1 for every dollar put it!!

Now usually in a Money Market Mutual Fund $1 invested = $1 Share.

BUT with the current Crisis on Wall Street some Money Market Mutual Funds are now only worth 97 cents on the dollar!!

So you would lose 3% IN ADDITION to any other fees paypal and eBay charge you and it could be worth even less. You could theoritcally get NOTHING!!!

Here is the article about the fund that has gone below $1 a share , Its been all over the news

http://www.usatoday.com/money/perfi/basics/2008-09-16-damage_N.htm?csp=34

 

There is no mentioned of Paypal in that article and besides I doubt it would put in all the money into the money market mutual fund. I thought that only when you invested in it that your money get transferred into it.

If you check eBay's 2nd Quarter results at http://files.shareholder.com/downlo...5348ca-3cd2-4c58-98a5-e24a06092b30/213648.pdf , you will noticed that it has about US$3.6 billion in cash and US$1.6 billion in customer funds. There is only US$355 million invested in short term investment and US$155 million invested in long term investment.

So it does appear that your warning may be a little out of proportion here.

It is also interesting to note that Paypal's gross income per transaction is about 3.89% and it cost about 1.23% to process each transaction and thus their net income would be about 2.66%. It also maintains a business loss due to fraud amounting to 0.27% of their income.

 

I don't think it is true.

 

a little correction.

$3.6 billion is mentioned as the "cash and cash equivalents"

Money market funds come under "cash equivalents" and not "short-term investments".

http://en.wikipedia.org/wiki/Cash_and_cash_equivalents

 

LOL , I hope thats not true

 

Thanks for the clarification but it does not change the fact that Customers' funds are not invested anywhere. eBay may have invested its own money in cash equivalent but did not touch the customers' money for that.

 

Paypal does put a percentage of their holdings in a money market fund. You can personally opt into the fund if you want as well, but if Paypal is operating ethically, the only money in the MM fund should be what members opt to put in it. Before the reserve killed interest rates it was a very good MM fund. Probably not so much anymore.

Additionally, the risk of money market funds completely collapsing is very low. The fund mentioned in the article fell 3% which is huge for a MM fund, but on the small scale it's not a huge deal unless you need to get your money out immediately and the fund has no chance of recovery.

 

Those Financial Crisis only helped me with more money,i am getting money from paypal at better conversion rate.

 

I agree with eddy09

 

While it is true that you could lose money through their Money Market Fund, it does not mean by using Paypal that you are at risk. You have to enroll into the fund before you are at risk.

Hit the Money Market link on the bottom of the page when you log into your account. This is where you enroll, if you did not enroll, you will not be at risk. If you choice to invest, your money will be put in the fund and you are at a little risk to lose money. This is often rare with Money Market Funds but it does happen on occasion.

Please be sure to provide all information when trying to scare Paypal users in the future.

 

That is beyond our control .I bless myself that every DPer could withdraw our hard earned money.

 

i dont think they invest out cash in such funds maybe thier profits are invested

 

I'm not sure, but I think it is a common way to "safely" store large amounts of short-term cash.
Money Markets used to be very safe, but things have changed.

 

Here's how Paypal stores balances, just found this link at the bottom of the Paypal website:
https://www.paypal.com/us/cgi-bin/webscr?cmd=xpt/UserAgreement/general/FDIC-outside

Basically if your money is not is the money market fund (completely Opt-in) it is fully FDIC insured. As long as you have less than $250,000 (Normally $100,000) (http://www.fdic.gov/news/news/financial/2008/fil08102a.html) your money id fully backed and is as safe as it can be.

Given the current economic state, I wouldn't count anything as 100% safe, but it would be big news if the FED filed for bankruptcy.

 

To be honest, the chances of losing all paypal funds are slim to none, as will all of the payment processors... however money isn't going to be worth what it was, and that's for sure. But don't try to look at the negatives during these times

 

Paypal has a sort of a mutual fund option where you can put your balance but that does not happen by default. They cannot just make 3% of your balance vanish because they did not risk it on your behalf. They always owe you all of it.

BTW if you are afraid of losing money through paypal you should worry about something REALISTIC like phishing scams cuz paypal does not guarantee protection there...

If you are in the US you can buy for $5 one of their RSA algorithm generator keyrings. Well worth the price for the peace of mind it gives you.

 

For us Living in India, it increases your returns !! For rupee has remained strong against the weak dollar . Before the crisis 1 Dollar was equivalent to 42 rupees now it is $1 is 47 rupees!! So if you are selling goods it is helful.but if you want to buy in dollars it is getting expensive

 

I can't believe such action could be taken...

 

I think you're kidding!