Is PayPal a Bank? (Not What You Think)

PayPal is a multinational company, operating many different functions similar to banks through its platform.

However, if you don’t have a bank or don’t like banks, you may be wondering if you can use PayPal as your bank? I did the research, and here is what I found!

Is Paypal a Bank In [currentyear]?

PayPal is not a bank, but is an online digital payment facilitator in [currentyear]. PayPal cannot be considered a bank because it doesn’t hold customers’ funds, and therefore doesn’t have a bank charter. However, its platform can be considered a neobank platform, because of the range of new functions it now offers, such as paychecks, direct deposit, and more.

If you want to learn more about PayPal’s new functions, what a neobank is, and more, keep reading for more useful facts!

Is PayPal a Financial Institution, Bank, Credit Card, or Banking App?

PayPal is not a bank, credit card, or banking app, but a financial institution through e-commerce, which allows PayPal to allow its customers to transfer payments to one another through online platforms.

Furthermore, PayPal also allows you to link your debit or credit card to your PayPal account.

PayPal also has a function called PayPal Credit, which allows you to get a credit card and build credit ( click here to learn how to apply for PayPal credit).

PayPal is trying to offer new features on its app that are used in neobanks. PayPal has recently updated its app to include paycheck direct deposits, savings accounts, bill pay, and more.

Neobanks are “financial technology” firms that offer apps and other technology platforms for mobile and online banking. They are also sometimes referred to as “challenger banks”.

Additionally, Neobanks are online-only banking platforms that don’t have a banking branch, but they are not online banks.

Online banks usually have bank charters, and offer general banking services such as loans. Other neobanks are Chime and Varo Bank. 

Why Is PayPal Not a Bank?

A quote from Feds: PayPal not a bank: “PayPal doesn’t have a charter, thus it is not a bank, the FDIC said.”

PayPal is not considered a bank, because it doesn’t have a bank charter. PayPal does not accept deposits or hold money, which would require a charter.

Do You Need a Bank Account for PayPal?

Do You Need a Bank Account for PayPal?

Fortunately, you don’t need a bank account to sign up or receive payments through PayPal.

However, you will not be able to move any money you receive through PayPal to your bank account, send any money to anyone, or pay for anything.

If you wish to move your money, send money to someone, or pay for any item or services, you will have to connect your bank account or a credit or debit card.

Additionally, it’s safe to link your bank account to PayPal.  However, you have to be careful because there are scammers.

Therefore, be wary of who you give your PayPal information to. Also, make sure you never send money to an account you don’t trust.

If you are ever scammed and your PayPal account is compromised, you need to unlink your bank account and report any unauthorized transactions to PayPal and your bank.

You have 60 days after an unauthorized charge to report it to PayPal, and you will not be held responsible.

To learn how to report any fraudulent activity on your account, click here. To learn how to unlink your bank account, click here.

To link your bank account to your PayPal account:

  1. Begin by logging in to your PayPal account, either on the app or
  2. Secondly, go to the “Wallet” tab, and click “Link a bank account”
  3. Next, select your bank account
    1. If you don’t see your bank account then click “Don’t see your bank?” at the bottom of the screen
    2. Depending on the bank you selected, you may be able to link your bank account instantly through your online banking login information
  4. If you’re unable to instantly link your bank account then, enter your bank account information and click “Agree and Link”
    1. If you’re eligible to instantly link your bank account, then all you have to do is log in with your bank ID and password

Furthermore, if you have the option to link your bank account instantly, PayPal will also be able to confirm your account instantly.

Unfortunately, if you had to enter the account information manually, you will also have to confirm your bank account manually.

Once your bank account is linked and confirmed, you will be able to move any money you have in your PayPal account, send money, and pay for items or services.

To know more, you can also read our posts on how does PayPal makes money, how long do PayPal refunds take, and if Walmart takes PayPal.


PayPal offers functions on its platform similar to banks such as PayPal Credit, and also has new functions such as paycheck, direct deposit, and more. With these functions, PayPal is trying to compete and become like many other neobanks.

Furthermore, PayPal does not accept deposits or hold money from its customers, therefore it does not need a bank charter, and without a bank charter, PayPal can not be considered a bank.

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Marques Thomas

Marques Thomas graduated with a MBA in 2011. Since then, Marques has worked in the retail and consumer service industry as a manager, advisor, and marketer. Marques is also the head writer and founder of

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