Using PayPal To Send Money? The Deal Just Got Sweeter!

When it comes to easy money transfers, nothing beats PayPal in terms of popularity. The process is very simple to send money to friends and family:

  • 1.Both the sender and the receiver should have a Paypal account
  • 2.If the payment is for personal use, there may or may not be fees depending upon the source of funds
  • 3.If you have a Paypal balance enough to cover your payment, there are no fees for personal transfers and the transfer is immediate
  • 4.If the funds are from a credit card, either the sender or the receiver will have to pay 2.9% + $0.30 USD in fees
  • 5.If the funds are backed by a bank account, there are no fees whatsoever, but the money is sent as an eCheck
  • 6. If you use PayPal to make a purchase or pay for a service, it is treated as a business use and there will be a fee

To avoid fees when using PayPal for personal use, obviously you don’t want to use your credit card as the source of funds. If you use a bank account, though there are no fees, but the receiver will have to wait for about a week to get the payment, which may not work for all circumstances.

The only way to avoid fees and do an immediate transfer was to keep a balance in the PayPal account. But I have my reasons for not keeping a balance in my PayPal account and there really wasn’t a way around this… until now!

Get Paid Everytime You Use Paypal To Send Money!

What if I told you you can send money via Paypal, fund it with a credit card yet not get charged any fees by either the credit card company or PayPal and actually earn cash back on your PayPal payment?

And the transfer is instant! No waiting a week to get the funds cleared.

Why I might never log in to PayPal to send money again!

Discover recently tied up with PayPal to offer a money transfer service for its members called Money Messenger. You can make a payment via this service wherever PayPal payments are accepted. The transfer is immediate and there are no fees either for the receiver or the sender for personal payments.

Just make sure you don’t keep a card balance! You would negate all benefits if you keep a balance.

Testing Discover/PayPal’s Money Messenger Service

I decided to take this for a spin! What if there is a catch? What if there are hidden fees? Only way to find out was to try it out!

1. Log in to your Discover account
To get started, you log in to your Discover account. You’ll find a new tab called ‘Send Money’

2. Enter payment details and verify
Enter and verify the recipient’s PayPal ID and the amount to send. Make sure you select Transaction Type as ‘Friends or Family’ to avoid fees
Discover's money messenger service via PayPal

3. Send!

Once sent, my wife (the recipient!) got a notification from PayPal (not Discover) on the transfer. I got an email stating the money has been claimed. The transfer was instant. No fees or commissions either for me or my wife! The best part? I earn a cashback from Discover each time I use Money Messenger service! Not to mention, I got a free float on the money sent!


How can I get paid for sending money?

Though the service is powered by PayPal, it is enabled by Discover. You will need a non business Discover card to use Money Messenger service.

Just to be clear, are there any fees whatsoever for using this service?

Not for personal money transfers. Make sure you choose this transaction type when entering the payment information. Neither Discover nor PayPal charges a fee for using Money Messenger service.

Can I use this service to pay for purchases that accept PayPal payments?

Yes. The recipient gets paid through PayPal even though it is funded by Discover. But for purchases, PayPal charges a fee. You’ll still get a cashback from Discover!

How quickly does the payee get the money?

When I tried it, it was within a few minutes.

Does the recipient require a PayPal account?

Yes to claim the money!

Does the sender require a PayPal account?

No! You only need a Discover card! You make the payment or money transfer via Discover’s site, not PayPal’s!

Limitations of Discover’s Money Messenger Service

  • You have a limit of $200 a day, $500 a month when using Money Messenger service
  • Business cards are not covered by this service

My thoughts

This service combines speed and convenience without charging me a dime and actually earning me a cashback! What’s not to love?! The daily and monthly limit is a little underwhelming, but for larger transfers I shouldn’t be using PayPal anyway!

I like the approach Discover took by partnering with PayPal rather than re-inventing this service. It gets access to PayPal’s huge user base instantly. Visa has its own micropayment service called PayClick which is undergoing trials in Australia and scheduled to be rolled out here in the US sometime this year. MasterCard has the MoneySend service which is very similar to PopMoney.

Believe it or not, I only have 3 credit cards in my wallet and one of them is Discover. Here’s why:

  • With discover I get cash as rewards, not expiring points or miles!
  • Bought an HDTV recently? I’m sure the salesman would’ve pushed for an extended warranty! When you pay with Discover you get extended warranty protection for free!
  • 5% cashback on revolving categories. This month for instance, if I use Discover to pay for gas, hotels or restaurants, I get 5% cash back
  • I’m thinking of getting an iPad. If I buy it from Apple, the cost including taxes would be around $530 for the base model. If I buy it using Discover from (online), I get 5% back which cuts the cost to $505! I bet you can’t find me a better price! One of the clever ways with which you can use this card!
  • Protection against theft or damage on your purchases for 3 months (90 days)
  • Frequent travelers will love this one! if your flight gets cancelled or delayed by 6 hours or more, you are covered for food and lodging for upto 3 days at $250 a day!
  • There are other benefits like bill pay, travel insurance, concierge service etc., which I don’t use but worth knowing it is there if I ever need it!
  • No annual fee in case you were wondering. I don’t sign up for cards with annual fees
  • And finally: HOWTO earn reward points AND get cash back with no fees

It would take a lot of convincing to sign me up for a credit card! I wouldn’t get or recommend this card if I didn’t think the rewards outweighed the effort.

But remember, if you keep a balance, no rewards card is worth it. Your best reward in that case would be paying off your balance in full.

50 thoughts on “Using PayPal To Send Money? The Deal Just Got Sweeter!

  1. This looks like a great way to avoid Paypal fees when sending money. I know that Chase also lets you send money through email if both parties have Chase accounts but it typically takes about 3 days for the exchange. Thanks for the heads up!

  2. This might be worth a try since I could make a little extra cashback. I have Discover and remember them advertising this service but I figured it would be the same terms as PayPal. The monthly limit will keep this from being too useful to me but I can at least use it up to the limit.

  3. Great info! I use Discover as well.

  4. Any tricks for us Canadians MC?:)

  5. Hey thanks for the tip! I don’t have a Discover card… but will check out the one you featured.

  6. I was surprised that on my last visit to paypal they wanted my bank information before I could make a payment to someone. But… only have a couple of credit cards, none are discover.

  7. This is a great article MoneyCone! Too bad it is not available for Canadians :( but like you said to Mich, our healthcare (and my pension plan) makes up for it LOL.

    Want to do some research on ZoomPass and see what you uncover?

    The Dividend Ninja

  8. I’ve never had a Discover card before so reading through at all of those benefits comes as quite a surprise. If I ever open an account I’d still want to keep a MC or Visa as my primary card since not all places accept Discover. That’s very cool they partnered with paypal like that though! -Sydney

    • That is true! That’s the reason I have 3 cards in my wallet! I use Discover mostly for the 5% I get on revolving categories and for the travel perks.

  9. I don’t have discover either… maybe someday Amex will come up with something like this.

  10. Thanks for the tips MC! I was big into Discover before when they offered the 5% cashback on gas purchases EVERY month, until the last few years they changed it to revolving cashback categories. I wasn’t aware about some of the other added perks. Great post!

  11. That is awesome! I already have a discover card, so I will be looking this up soon. Thanks for the heads up.

  12. Too bad we don’t have Chase or Discover here in Canada. I like Paypal though- I use it for a lot of things like online shopping and for managing my blog.

  13. Good information. I wish I had Discover card. I think they send me an offer each month…just might take advatage next time.

  14. Field of credit cards and payment tools is becoming fierce and competitive. I am noticing a trend where card, wireless and payment provider companies are tying up with each other. It’s a game of survival now, united we stand kind of approach.

  15. Thank you for sharing this. I always like learning how to save on fees. Paypal is a great service, but if we can get it for cheaper/free, then why not?

  16. Great minds think alike MC, I’m a loyal Discover card holder. I use it to get entries into their Million Dollar giveaway. I also get gift cards from TJMAXX because they actually give you more bang for your buck rather than cashing out. Also, when you make a transfer via PayPal, what shows up as the payer? Your Discover card account name? Regardless, great job!

    • Your question had me digging through the process again! Yes the recipient gets an email from your name/email id registered with your Discover account. Your card details are not shown.

      Remember, you can use this even if you don’t have a PayPal account. Only the payee needs to have one.

  17. I do have a Discover card, so this will come in handy! Thanks for the tip!

  18. Didn’t know about the Discover/Paypal service.

    Also point 2 from above:

    “2.If the payment is for personal use, there may or may not be fees depending upon the source of funds”

    I believe the ‘for personal use’, there aren’t fees unless if you also send to other countries. I’ve sent a friend in the UK funds and was charged $0.30 fee, even though it was for personal use and directly out of the funds in our paypal account.

    • Thanks for chiming in Ben.

      For non-domestic transfers, personal or otherwise, PayPal will charge a fee. I should’ve clarified.

  19. I love this! Sending money to family and friends couldn’t get easier! And you get cash back! Amazing. I hope they don’t decide to eliminat this feature if too many people use it.

  20. MC, how about for receiving money though? That’s the real killer for some of us, always paying the 3% fee.



    • Sam, there is no fee if you choose transaction type as ‘Personal’. PayPal charges a fee only for business transactions.

      By default, the transaction type in PayPal’s payment screen is ‘business’ and most don’t bother to change the type and hence the fee.

      For non business money transfers neither the payer nor the payee should see any fees.

  21. Paypal allowed me only 6 personal payments last month. After that it started saying I have exceeded my limit and added a fee. Annoying. This might be a great workaround and earn some cash back. I have to get myself a discover card though. I am hearing more and more perks for having one. Thanks for the review. It will come in handy.

  22. Very interesting — if I ever get to the point where I have to send money a lot, this may be the way to go!

  23. Interesting stuff! I know that I’m still paying 1% even for the personal PayPal transfer simply because I am in Canada. The injustice! :P

  24. Considering the fact that banks are going to start charging an ATM fee I love my PayPal account even more!

  25. I have never done this even thought I have a paypal account. I will try it out because I have also Discover card. Thanks for sharing this info.

  26. Thanks for this info. I did not know about this. I have to try it out too. So, basically I can send $200 to my paypal account from discover and get 1% cash back on $200? Pretty neat…

  27. Another way to avoid fees is to send the money as a gift. A PayPal associate suggested that to me.

  28. I use Money Messenger regularly and love it! However, my wife’s Discover account isn’t able to use the service. After several inquiries to Discover, nobody is able to successfully tell me why she isn’t able to use the service.

    Anybody have any ideas to why her account isn’t eligible?

  29. I use paypal a lot so I end up paying the fees every time. That’s a cool trick using the Discover card to pay. I’ll definitely check that out. Thanks!

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