Paypal has been around for quite a while. It is similar to having a mini bank online in some ways, and quite different in other ways. Although there are now other similar systems around, this one was the first and not only sets the standards, but is the most widely accepted for spending purposes.

When it first began in this country Paypal had three quite different types of account, one for those people who ran a business, and then two personal sorts one very basic where very few charges were made, but where you only had very limited things you could do, and one where more charges occurred but where you could use credit cards and things like that. Now however, there are only two types (personal or business), the personal account is just charged in different ways according to what you do on it.

When you first sign up to Paypal, your account is unverified, and you are limited to sending and receiving only a low amount of money. In order to verify your account, you have to do a few simple things such as linking your Paypal account to your bank account and them paying two small amounts into the account - these are literally pennies, and you then put the two amounts in to the Paypal system to show you've received them and are the owner of that bank account. Another verification method is to link your debit/credit card, and a third is giving them your phone number and having them call you, and you giving them some numbers that they've just showed you on the computer (an automated set up where you never speak to a human being).

I've had an account for many years, and I find the system very easy to use. You can have money sitting in the Paypal account or you can pay with a credit or debit card (if it's been linked to the account), through Paypal. Either way, when you spend money you're not charged anything for using the system. When you receive money however, it's a different matter, and it depends very much on how you receive the money as to whether you get charged or not.

I know this sounds quite complicated and in some ways it is, but once you get your head around it, it's not as bad as it seems. On the website you have tabs along the top. One of them is for sending money. When you select this, you then have various choices you can make according to what you are paying for. When you're paying for goods or a service (like buying something from an online store), you send it using the 'purchase' tab'. That means that the person you're sending the money to gets charged fees for receiving the money. If you're sending money to someone for another reason - like my dad sending me birthday money for example - you use the 'personal' tab instead. In here you can choose to gift someone money, send them a personal payment that's owed, pay for household expenses or 'other'. Using these options within the personal tab means that whoever you're sending the money to won't be charged for receiving it. - This only applies if you are using any balance that's in your Paypal account or is coming from your bank account. If you use your debit or credit card to pay it, then fee's apply, but the sender can choose to pay them or leave the receiver to pay them.

For a long time, when I had my account, I only really used it to buy things, or to send money to friends or family like this, I used money that was in my Paypal account transferring it in there from my bank account before I wanted it. I didn't use it in connection with selling anything which meant that for me, it was very cheap to use as there were very few fees encountered.

Once I started selling on Ebay (sister site to Paypal), I started to find out just how high the fee's can be. All Ebay transactions have to offer Paypal as a payment method, which means that if the person chooses to pay you this way, you will not only be paying Ebay fee's for listing and final value, but you'll also be paying Paypal fee's to receive the money as well.

These fees are 20p plus 3.4% of the transaction value (unless you sell a VAST amount in which case the fee's are reduced to 20p + 1.4% - vast being something over £1,500 a month or something daft!). So if someone sends you £10, you will lose 20p + 34p (3.4%). If someone pays you £20, you'll lose 20p + 68p.

To be honest, I don't find these fees too bad, I know what they will be, and if I'm selling something on Ebay I just work out my minimum I'm willing to accept in the knowledge that I'll have these fees as well as Ebay's own fees to pay. I know some people are quite surprised by them however - my husband was when he first sold something on Ebay. The item he sold was quite a pricey one, and instead of receiving the £75 (or whatever it was), he lost a chunk of it (£2.75) to Paypal and was a bit miffed by it.

I personally think that these fee's are maybe a wee bit high, but I suppose with all the free methods of sending and receiving money through Paypal that are available, they have to take their cut somewhere, and it's not really any different to using a pre-pay credit card really as these work on a similar principal except that most of them are just below the 3% mark on what they charge, or only charge it when a transaction is abroad not in the UK or something (depends on the card though).

I do like that I can withdraw money to my bank account for free. It means if I sell something on Ebay for example, then I can get at the money in a conventional way instead of just having to spend it online somewhere.

I also like that Paypal is quite a safe method to use. I've had a couple of issues over the years where goods haven't arrived and where the company that I've dealt with has refused to refund me. Now when this happened and I'd used my debit card I had very little recourse. However on the occasion where I'd used Paypal, I was able to put in a complaint through their system, and they then give a fixed length of time for the seller to respond to the complaint before they make a decision on it. Mine was from a t-shirt company who not only never sent me my t-shirts having taken my money, but also were really rude in their e-mails to me when I tried to get my money back. Paypal resolved the issue and my money was refunded to me for which I was very grateful.