How Does PayPal Work in Canada?

PayPal is one of the world’s most popular digital payment services and is used by individual consumers and businesses of all sizes. In addition to being a platform for sending and receiving money nationally and internationally, consumers also use PayPal to make online purchases in the form of one-time payments and subscriptions.

For businesses, PayPal offers a payment gateway along with several financial services. This guide will tell you everything you need to know about how PayPal works in Canada so that you can decide whether it is the right digital payment solution for you. You will find out how to send and receive money with PayPal, how to make purchases with PayPal, how to use the platform for business purposes, and more.

What is PayPal and how does it work?

PayPal is a digital payment service used to send and receive money. Individuals typically use PayPal to send or receive money from people they know (e.g., friends) and to make online purchases, while businesses use PayPal to receive money from customers.

PayPal started to operate in Canada in 2006, and it now serves millions of individuals and thousands of businesses. PayPal allows sending and receiving money in over 100 currencies, holding balances in 25, and withdrawing funds in over 50.

You do not need to provide banking information to send or receive money on PayPal, as the platform acts as an intermediary between two PayPal accounts. For example, you can send money to a friend if they have a PayPal account and you know the email address or the mobile number associated with their PayPal account.

When you make a payment to a business that accepts PayPal, you do not provide them with any financial information. They will only get to know your email address, phone number, and your physical address for shipping purposes.

PayPal personal vs. PayPal business account

PayPal offers two types of accounts to their customers: personal and business. Customers can create both a personal and a business account if they wish to. A PayPal personal account is helpful for those who want to send money fast to anyone who has a PayPal account and has provided them with a registered email or phone number.

The advantages of making online purchases with PayPal include the ability to store all your financial information behind a single login credential and to shop for goods and services in 25 currencies provided by merchants located all over the world. PayPal offers many capabilities for businesses of all sizes, including collecting one-time and recurring payments.

PayPal Business can be especially useful to eCommerce websites, as the platform provides its own payment gateway and includes seller protection for fraudulent claims and chargebacks. PayPal’s seller protection does not, however, cover digital goods.

Making a PayPal account

To create a PayPal account, go to paypal.com/ca and click the “Sign Up” button. You will then be asked to choose between a personal or a business account.

Then, if you select a personal account, you will be asked to choose your country and provide a valid phone number. If you select to create a business account, you will be asked to provide your business information.

Once you register an account, you will be able to send and receive money. However, your account will be limited until you complete a verification process.

You can verify the information provided by linking a credit card or a debit card and/or a chequing or savings account. Once your account is verified, you can send up to $10,000 CAD per transaction.

Adding money to your PayPal account

To add money to your PayPal account, go to Money and then click the “Add Money” button. Enter the amount you want to deposit and then click “Add” (if you have a personal account) or “Transfer” (If you have a business account). To add money from the PayPal app, tap PayPal Balance and then “Add Money”.

Sending money

To send money from your PayPal account to another PayPal account, all you need to do is to click the “Send” or “Request” tab and choose the Send Payment option. Then, enter the amount of money you want to send and the recipient’s email or phone number and click on the confirmation button.

Receiving money

Receiving money with PayPal is even easier than sending, as you don’t need to do anything but provide the sender with the email address or phone number associated with your PayPal account. Any money sent to your PayPal account will be automatically added to the account’s balance, and you will receive an email informing you that you have received a payment.

Withdrawing money

Once you have linked a bank account or a prepaid card such as KOHO to your PayPal account, you can withdraw money. To do so, click “Transfer Money” below your PayPal balance on the account’s home page and select where you want your money to go. Then, enter the amount you want to withdraw, review the details, and click “Transfer Now”.

PayPal also offers the option to enable automatic transfers. To use this service, click the “More Options” icon next to the PayPal balance and select “Automatic Transfers.” Select the bank account, amount to be transferred, and frequency. Then, click “Turn on Automatic Transfers”.

PayPal for businesses

PayPal provides several services for business consumers. For instance, online stores can use PayPal Checkout to accept various payments, including most debit and credit cards.

Businesses who prefer to take payments via PayPal with a simpler solution can implement a PayPal payment button on their website. Adding a PayPal button does not require significant coding experience, as PayPal provides a prebuilt code that needs to be pasted next to the products or services.

In addition to providing a payment gateway, PayPal’s business offering includes invoicing, mass payouts, shipping services, and different analytical capabilities.

Due to its business capabilities and popularity among consumers, many merchants with an online presence provide PayPal as a payment option. When a business supports PayPal payments, they will give this payment as an option during checkout.

Popular online stores that accept PayPal in Canada include Banggood, Canada Goose, PetSmart, Roots, and Walmart.

Cancellations and refund requests

It is usually the case that you can only cancel a PayPal payment that has not been cleared. Of course, some online merchants may allow cancelling an order even after the payment has been processed. In such a case, you will need to contact the merchant and not PayPal.

You have 180 days from the transaction date to report a problem with a purchase. If you haven’t received the item you purchased with your PayPal account or the item sent to you is not as described, you may be eligible for a refund. However, you should first request a refund directly from the merchants.

If a merchant refuses to fulfill a refund request that you believe it’s justifiable, you can request the refund through PayPal. To do so, go to your transaction history by clicking Activity on the top menu from your dashboard. Then, find the payment you want to dispute and click on it. You will be redirected to a new page. Scroll down until you reach something that looks like this:

While PayPal may solve the dispute in your favour, this is not guaranteed. The duration required to resolve a claim varies, depending on how quickly both parties respond to inquiries and whether or not PayPal needs additional information. A significant percentage of claims are resolved within 30 days. 

PayPal fees

PayPal fees for sending money vary according to the payment method and the recipient’s location. For example, there are no fees for sending money to friends or families, but you will pay a 2.9% transaction fee plus a fixed currency-based fee if you pay with a credit card or Visa Debit. 

When you send money from Canada to the U.S. or Europe, you will pay $2.99 CAD plus a fixed currency-based fee. The amount of the fixed fee varies by the country’s currency received. For example, if your recipient will receive dollars, you will pay a fixed fee of USD 0.30. There are no fees for withdrawing money from PayPal to a bank account, but there are fees for withdrawals delivered by cheque. 

PayPal typically charges a currency conversion fee between 3% to 4%. These fees apply when paying for goods and/or services priced in a different currency, transferring money to personal accounts registered in other currencies, and using PayPal Payouts or MassPay for other currencies.

Bottom line: PayPal is a good option for sending money to friends & shopping online

If you need to send money to family and friends or receive money from them, PayPal is one of the best digital payment options for you. If you are a business, especially a small eCommerce business, you will likely find it easy to start collecting payments with PayPal’s payment gateway.

PayPal is not, however, the best solution for everyone. For example, Wise is a better solution for transferring money abroad, as it provides a better currency conversion fee. Interac e-Transfer, on the other hand, is a more straightforward solution for transferring funds from one Canadian chequing account to another. In addition, businesses selling digital goods may also find PayPal less than ideal, as its seller protection policy only includes physical goods for fraudulent claims and chargebacks.