PayPal Money Market Fund Closing July 29, 2011

I find this notice laughable only because PayPal has been such a non-player for years when it comes to earning any type of interest in their accounts. Effective July 29, 2011, PayPal will end the money market fund. Any earnings will be credited to your account within 7 days of account activation.

How does this affect PayPal users? Well it should not. Honestly, at the time of this writing, PayPal is only paying 0.05% in the money market account. The interest rates they have been paying have been dismal for years, and I have not even given them a second look when it comes to keeping my money with PayPal.

When I was in college, I was huge into eBay and PayPal, and would sell and buy tons of products. Money Market accounts, and specifically PayPal’s, were exceptional and well above the industry average. I used to keep quite a bit of money liquid in a PayPal account.

In 2007-2008, my wife and I were saving for our wedding, and we kept our money in the PayPal account, earning somewhere in the range of 3-5%. We had built up a substantial savings and were earning decent dividends for the time. When we were on a trip in the Outer Banks, I started noticing my bank accounts were getting drained, as well as our PayPal account. Someone had hacked into our account. I instantly contacted PayPal, and luckily, they were able to quickly reverse the transactions and credit us back the money.

That is when I disconnected my bank accounts from my PayPal accounts. There was too much money sitting in the account to risk losing it by hackers. Around that time, eBay also became less lucrative, and to this day I have given up with any interaction with my eBay or PayPal accounts, except on rare occasions.

We no longer keep any money in our accounts with PayPal because of the high risk of infiltration, as well as the pitiful money market rates.

So if you have any money sitting in your PayPal account, shame on you! The money should be in some other more secure and higher earning account.