Basically, PayPal is an electronic money transferring agent. Their system works like an online bank. You can transfer money into your PayPal account. Then you can send it to whoever you wish (note that there are certain things you can not use Paypal for, such as sending someone money for personal use). When you send money to paypal, it is stored in one of the banks Ebay uses for money storage and is linked to your account via paper documents and electronic documents. All money is FDIC ensured just like a bank up to $100,000.
There are no hidden fees about Paypal. The basic account is completely free, but can not accept Credit Card Transfers (you can send them, however). The Premier account can accept Credit Card payments, but a fee of 2.2% + $0.30 is charged to the transation.
The only bad thing I have found with Paypal is that transfers take 3-5 days if you are transferring from a checking account. Other than that, I haven't had any problems with them.
www.paypalwarning.com Ive had one for a couple of years. Its good for ebay, not much else. Lots o people claim to lose their money but if you just use it for transfers your fairly safe. DONT KEEP CASH IN YOUR PAYPAL ACCOUNT!!! Dont know what the previous post meant about not using it for personal use? I havnt used pp for awhile but I used to send and receive money from people all the time (shady ebay dealings). Thats what pp was all about. sending money to anyone with an e-mail address. Has sumthin changed???
I've had a PP account for a couple years. I've never had any problems with it and I usually have a balance of over $50 in it. Never lost a penny out of it. As far as sending fund for "personal" reason, I've never had a problem with it, since I always mark it as a "service payment" and make something up. The only thing I would watch out for is if someone wants to pay you via a credit card. It's very easy to get changed to a premium account that charges (as Reg said) and damn near impossible to get off of it. The only way to avoid it is to deny CC payments if you get them (which I've done).
Overall, I don't think PP is bad at all, as long as you watch out for credit card payments. I have a friend who's been trying for 2 months to get premium account turned off, with little success.