Laptop Boy and the ABA
Written: May 03 '01
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Pros: Good service, excellent method of storing money in college.
Cons: Rate just dropped again to 3.75%, small fees associated with the service.
The Bottom Line: Use PayPal as a method of keeping money instead of earning dropping interest rates elsewhere.
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| MK2K's Full Review: PayPal |
I feel it is time, faithful reader, to reveal a slight bit more about Laptop Boy. Although you already know his not-so-secret identity, you probably have no concept of his day-to-day life. His methods. His mannerisms. How he balances his checkbook and handles his bank.
It is the last of these that Laptop Boy addresses in this article. Laptop Boy battles his bank, just like the rest of us. He spends time trying to get a decent rate for not a small amount of cash, storing what he can when he can (like the black squirrels that reside on his college campus). For Laptop Boy is a freelancer, and “dependable income” isn’t part of his normal vocabulary. So Laptop Boy knows the value of savings. If you live from one paycheck to the next, as Laptop Boy often does, it is very important to save. But Laptop Boy has a quandary. Like many people, Laptop Boy is capable with cash. He pays his bills, and manages his finances with finesse. He even understands, to a small degree, how the economy works.
But Laptop Boy is a college student, and, as we all know, it isn’t easy to save as a college student. And although it’s hard enough to save as a college student, its harder still to get a good interest rate as a college student. Why? Well, as we know, most bank accounts are tiered. That means that if I have a $500 savings account, it earns me more interest than if I have a $300 account (in most banks). And since as a student most things available to Laptop Boy are dinky free checking accounts which charge me $28 every time I go a penny under zero, or savings accounts that earn 3% APR (compounded quarterly), well… Laptop Boy isn’t exactly pleased.
So what is a Laptop Boy to do?
He joins PayPal.
PayPal, a service normally associated with online auctions, is in fact an excellent method of banking for a low-income individual. All you need to bank with PayPal is access to a computer and another bank account.
PayPal isn’t technically a bank account. It’s a transfer service that allows users to send money to other people. This money is just like a check (aside from the fact that you don’t have the paper sitting around, and that PayPal does its books for you). If you have a premier account or a business account, then PayPal takes 1.6% + $.30 (for items over $10, $.30 for items under $10) from the money an outside party sends to you (when you send they receive the exact amount, unless they also have a Premiere account). And, as it seems, PayPal is actually working an ATM and debit card system (Laptop Boy is on the list to receive a debit card from them… he will let you know how that one goes). If you have a bank account, you can set up PayPal to transfer from one account to another. With any account, you receive $5 for signing up, and if you have a Premiere account, you receive an additional $5 for each person you sign up.
And for all this hassle, you earn 4.2% in a money market that all PayPal cash resides in. This 4.2% is compounded monthly, so that each month you get some of your interest (not each quarter, like with a bank or a credit union). And what is 4.2%, anyways. Well, nickel-and-dime person that Laptop Boy is, he recently made a transfer of $.48 from his credit union (3% APR, compounded Quarterly) to PayPal (4.2% APR, compounded monthly). Why? Because, at the end of the year, Laptop Boy would have an extra penny by switching it over. The credit union would have made $.48 into $.49, where as PayPal makes the $.48 into $.50. And while this action might seem trivial to you, let’s multiply this a bit… if you earn an extra $.02 on every dollar with PayPal (you in fact make 1.8 pennies on every dollar, should you leave the amount in a year), then this can add up. With a hundred dollars, you make an extra $1.80, with a thousand, you make an extra $18.
So why not use PayPal?
Laptop Boy has his grievances with PayPal… oh yes he does. The good and bad news with PayPal’s interest is that it fluctuates… fast. Although the rate has been at 4.2% for a while now (approximately 2 months, from my recollection), PayPal’s interest rate changes weekly. It originally was 5.2%, then 5.25%, then 5.3%. And when Greenspan (chairman of the Federal Reserve) cut rates, PayPal’s rates dropped quickly to 4.2%. And although Laptop Boy’s not pleased about this, Laptop Boy can deal with it…. it is still better than his credit union. PayPal’s other problem is accessibility. PayPal is very good about account transfers… Laptop Boy normally gets money from PayPal to his checking account in 2-3 business days… Yahoo! PayDirect (a similar service that does not earn interest) only is able to offer Laptop Boy money in about 4-5. But I still can’t use PayPal in an emergency. I can’t use PayPal to buy gas. Of course, with their new debit card program, that problem should be fixed.
Laptop Boy also gives you $5 for signing up, provided that you transfer at least $50 from one account into PayPal (you can transfer the money right back).
So then what exactly is my problem with PayPal? Why the hell am I writing this article? Am I just giving some corporate shill?
No.
Laptop Boy’s problem with PayPal is the very reason Laptop Boy likes PayPal… it’s not a bank. Laptop Boy’s enemy isn’t PayPal but the ABA, who have decided that PayPal and Yahoo! Paydirect can’t play nicely.
Since PayDirect doesn’t charge to accept money, Laptop Boy would really rather use PayDirect to send and receive. He would rather use Yahoo!’s service to interface with other things on Yahoo! To buy at Auctions. But the ABA, evil villains that they are, refuse to play nice.
Laptop Boy recently quested to link his new Yahoo! PayDirect account and his PayPal account. To do this, he went to his credit union and figured out, by hook and by crook (actually, just by knowing what to ask) what PayPal’s routing number (and his account number) were. He asked the guy at the credit union to take any one of a number of transfers and tell Laptop Boy where it went (the routing and account number), out of hopes that he could use the two services together. And they did, after bringing out a huge blue book that looked like Laptop Boy’s most trusty bludgeon weapon (the Windows 98 Resource Kit, a 2000-page textbook on Laptop Boy’s floor). And so Laptop Boy went to Yahoo! And entered in his account and routing number… only to find that Yahoo! (or rather the evil ABA) did not like the routing number. It wouldn’t work.
It told Laptop Boy that the routing number was invalid.
What could Laptop Boy do in his incomparable rage? Laugh? Cry? No… Laptop Boy was powerless. He would have to wait eight business days to transfer the money between Yahoo! And PayPal. Laptop Boy, faithful readers, has lost. The ABA had won this round… but Laptop Boy will be back.
Regardless of this time of victory malnutrition, Laptop Boy does recommend PayPal for any college student. The money is secure (PayPal has 6 million users), although PayPal is not FDIC insured (each account is insured to up to $100,000 theft or loss, but not by FDIC), and Laptop Boy does earn more money through PayPal than he can through any other bank available to him at the present time, and soon Laptop Boy will gain his triumph against the evil ABA. So those who did not know about PayPal may sign up through Laptop Boy’s link:
https://secure.paypal.com/affil/pal=hcritic%40nettaxi.com
Recommended:
Yes
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Epinions.com ID:
MK2K
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Member: James Brundage
Location: Kent, Ohio
Reviews written: 400
Trusted by: 147 members
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