The PayPal Money Market Fund: Earn Money with Your PayPal Account

The PayPal Money Market Fund is a special fund developed for PayPal account holders to start earning interest on their unused PayPal account balances. Rather than having unused account balances remain static until you deposit or withdraw, PayPal Money Market Fund gets your money working for you.

Currently the Fund pays offers a yield of about 4.5%. A traditional checking account currently earns only about 1.27%. Over the course of a year, then, if you started with an investment of $1,000 and put nothing else into it you would earn about $45 with your PayPal account versus $12.70 you would earn with a checking account. And both of these are more than the $0 in interest that you are currently earning with your PayPal account.

Basics of Money Market Funds

If we are going to invest our money into a money market fund, we should have a basic idea of what a money market fund is.

Money market funds are a type of mutual fund, made up of a pool of assets of a group of investors that are then invested in a portfolio of stocks, bonds and other investments. Money market funds are considered to be the safest type of mutual fund with the lowest level of risk, as well as the most liquid.

Assets in money market funds are invested in short term interest bearing loans made to banks, corporations, municipal, state and federal governments, etc. These loans range over periods of between 1 and 90 days (the 90 day maximum is enforced by the Securities Exchange Commission). Because the loans are made over such a short period of time there is little chance of default and returns are almost guaranteed.

The investment of the assets of the Fund are overseen by an investment manager. This is a highly trained professional who is in charge of making sure that the Fund makes the most money possible while minimizing risk to investors. PayPal Money Market Fund is headed by Barclay's Global Fund Advisors (BGFA), one of the most trusted asset management services in the world.

Unlike a normal mutual fund, money market funds keep share prices at exactly $1.00 per share. Earnings are reinvested into more shares of the fund, or can be withdrawn as cash.

Investing in the PayPal Money Market Fund

Investing in the PayPal Money Market Fund is a very simple process. If you already have a PayPal account, you can sign up for the fund as an extra on the account.

Once you have signed up your account for the PayPal Money Market Fund, any unused balance in your account is automatically invested in the fund, to be used for the purposes of fund. Dividends on all accounts are calculated at the end of each business day. These dividends are added up over the course of the month and are paid out to account holders at the beginning of the next month.

Don't worry about being able to put money into or take money out of your account if you invest in the PayPal Money Market Fund. The Fund only looks at unused balances, and you can withdraw your money at any time. The money in your account earns interest until the date that you withdraw.

This is possible because of the inherent liquidity of money market funds. As all investments are made in short-term interest bearing loans, money is being circulated through the system on a constant basis and it is exceedingly easy to pull money out of the fund, unlike other types of investments.

Risks of the PayPal Money Market Fund

It should be noted that there are risks associated with investing in the PayPal Money Market Fund, just as there are with investing in any mutual fund. Although considered to be the lowest risk investment for a mutual fund, this does not mean that there is no risk at all.

Normal bank accounts are protected under FDIC (Federal Deposit Insurance Corporation) up to $100,000. This means that should the bank default, declare bankruptcy, etc., your invested is protected by the federal government up to this amount, assuring safety.

Money market funds and mutual funds in general are not protected by the CDIC, taking away this level of protection. Also, unlike normal accounts it is possible for the fund to lose money. The chance of this happening is extremely slim, but it should be noted.

Summary of the PayPal Money Market Fund

If you already have a PayPal account, setting it up to participate in the PayPal Money Market Fund can be a great way to make money with your account. All unused balances are automatically invested in the fund, and dividends are calculated on a daily basis, so even if you must make a withdrawal halfway through the month, you've still earned interest on your money until that date.

While there is a slight amount of risk involved with investing in the Money Market Fund, it is still an extremely safe investment that offers far greater returns than you will find with traditional savings or checking accounts.

Over all, the PayPal Money Market Fund is a great opportunity for users who have a PayPal account or are thinking of acquiring one. Before signing up for the Fund, however, you should look over the information provided by PayPal in the Fund's prospectus found on their web site.