The answer lies in how useful a Paypal Debit Card can be versus holding the balance in your bank account.  Does holding a balance to use with a Paypal Debit Card help consumers?  Or should consumers transfer money to their bank account for the advantages it provides (if any)? A quick glance through the pros and cons should provide those considering the question a template for decision making.

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The most convincing arguments for utilizing the Paypal Debit Card, rather than transferring the funds to a bank account are: 1) convenience and 2) speed of availability.

As soon as you are paid or compensated via Paypal, the Debit Card makes the balance available to use immediately. That means that if you have a pressing obligation or a purchase that is time sensitive, you won’t have to wait 3 to 5 business days until the balance is transferred to your bank.  Additionally, you won’t have trouble using your card just about anywhere, as it carries the MasterCard processing sign.  You can make purchases both online and offline and it can serve as a first option as long as the funds are there.

Moreover, as individuals begin to accept mobile payments utilizing Paypal, it is likely that non-traditional compensation will increase, making these benefits even more pronounced.

The most convincing arguments for not using the PayPal Debit Card, rather than transferring the funds to a bank account are: 1) the inconvenience of transferring funds to a Paypal account, 2) limitations of use and 3) fees of use.

There is typically a 3-5 day wait to transfer funds into your Paypal account.  That means that if you don’t have enough money in your Paypal account to make an actual purchase, you may have difficulty with it until you can get enough funds into your account.

Once those funds are there, you are limited to being able to withdraw $400 daily.  Unfortunately, Paypal is not a bank so there is no place to go and withdraw funds if you need more.  Lastly, when you withdraw those funds, you do have to pay an ATM fee for them.  There are some cases where Paypal aligns itself with institutions that provide free ATM withdrawals, but that is on a location by location basis.

One of the more troubling aspects of Paypal, is that it is not regulated like a bank and as a result there are certain built in consumer protections that do not exist.  Paypal can freeze an account when it suspects fraudulent activity, which can hamper your ability to transact business.  Monitoring your account activity is vital to relying on its use on a regular basis.

While a Paypal Debit Card provides conveniences, there are definite precautions you should take before you choose to rely on it as a payment method.  The best alternative may be to be intentional about using your balances for certain special purposes, but not to use it as your bank.  Having your funds frozen when your mortgage is due could cause major problems.

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