Buying products on the internet used to be a worrying experience. However, tapping in your credit card details and hoping that no-one would steal your details is pretty much a thing of the past. In 2011 alone, UK shoppers spent roughly £70 billion pounds shopping online.

Websites such as Amazon include "1-click ordering", meaning you don't have to enter any details at all to buy something. Your card number and address are stored by Amazon and the payment process is so reliable, most people never give it a second thought.

However, when making any kind of purchase we should always remain vigilant. PayPal has established itself as a safe, free and convenient way to pay for goods and services. PayPal runs as a kind of middle man, processing payments between merchants and banks. It currently has around 100 million active users.

PayPal enables users to send money to other people's email addresses, with neither party seeing one another's bank details or card information. PayPal is owned by eBay, and it's almost mandatory to have a PayPal account since many sellers accept payment only via PayPal (95% of eBay transactions go through PayPal). If an eBay seller wants to build a successful online store, they'll need to accept PayPal payment to attract a large audience.

Aside from the fact that no bank details are given to the seller, the benefit of PayPal is that there's no charge to send money. When you buy something and pay using PayPal, therefore, you won't have to pay any extra fees beyond the item's price and any delivery costs.

However, PayPal does charge to receive money. The standard rate for receiving payments for goods and services is 3.4%. You can read more on PayPal fees on its website.

PayPal's Buyer Protection means that its support team will help resolve disputes, for example if you didn't receive an item you paid for. Every transaction if confirmed by an email sent to the PayPal account holder.

To set up a PayPal account all you need is an email account and a valid bank account or credit/debit card. There are three PayPal accounts to choose from:

  • PayPal Personal Account (basic, pay and receive funds, limit on how much you can receive each month, can receive payment only through PayPal accounts)
  • PayPal Premier Account (same features as personal but will accept credit and debit card, and bank account payments)
  • PayPal Business Account (for individuals running an online business or store, no restrictions or transaction limit)

Payment methods are either determined by 'current balance' or 'instant withdrawal'. The current balance option allows you to add funds to your PayPal account and store money there. If you don't want to add money to your PayPal account, you can use the 'instant withdrawal' option to pay for purchases. This is an instant bank transfer or an automatic debit card payment. The card will debited within two days.

You  can withdraw money from a PayPal account to your bank account. This usually takes two to three business days.

How to set up a PayPal account

Step one. Browse to PayPal's website and click the Sign Up button. From there you'll need to choose between personal use or business use. Now fill out the 'Enter your Information' page, agree to the User Agreement and Privacy Policy by checking the box and then click 'Agree and Create Account'.

Enter details

Step Two: Next you'll see a page asking for bank account details. Make sure that the details are exactly as they appear on your statement as it could result in a failed transfer. Only one bank account can be added at this time, however when a PayPal account is verified you can have up to eight.

Link a bank account

Step Three. Click Continue and you'll see a message that, in the next two or three days, PayPal will make two small deposits (less than a pound) to your bank account. In the Bank Accounts section, click Unconfirmed next to your account, and follow the instructions.

Set up bank funding

Step Four. Check the email account you've used for PayPal and looks for the confirmation email from PayPal. Click the link to confirm that you own that email address, and you'll be taken to PayPal's website where you can sign in using the details you set up at the beginning.

Activae account

Step Five. Once you have successfully confirmed your bank account, the next stage is to get verified. In the Account Overview page click on the 'Get Verified' link. Enter your bank details and review the direct debit agreement. PayPal will then take two small deposits from your bank account within five working days. Once you find out the amounts, log in to your PayPal account and click 'Complete bank setup'. Enter the deposit amounts and you'll be verified.

Get verified

Continues on next page