What happens when a payment comes to you through PayPal
When someone sends you money through PayPal, it lands in your PayPal account first — not your bank account. You then decide whether to leave it there, transfer it to your bank, or use it to pay someone else. The money sits in your PayPal balance until you move it. This matters for refunds because the person sending the refund chooses the method, but you control what happens next.
PayPal works differently depending on whether you have a personal account or a business account. A personal account is free and handles money between individuals. A business account costs nothing to open but is designed for people who sell things or receive regular payments. For a one-time refund, a personal account is usually what you need.
Key Takeaways
- Money sent to you through PayPal arrives in your PayPal balance, not automatically in your bank account.
- You need a PayPal account with a verified email address before anyone can send you money.
- To move money from PayPal to your bank account, you link your bank details and request a transfer, which usually takes one to three business days.
- If someone refunds you through PayPal, the money returns to your PayPal account, and you can then transfer it to your bank or use it to pay someone else.
- PayPal holds some refunds for up to 21 days if your account is new or if the refund amount is unusually large.
Setting up a PayPal account to receive money
Go to paypal.com and click "Sign Up" in the top right. Choose "Personal Account" unless you regularly receive payments for a business or service. Enter your email address, create a password, and provide your full name, date of birth, and address. PayPal will send a confirmation email to the address you entered — open it and click the link to verify your email.
After you verify your email, PayPal asks for your phone number and a payment method. You can add a debit card, credit card, or bank account. For receiving refunds, adding a bank account is most useful because it lets you move money out of PayPal later. To add a bank account, you will need your routing number and account number, which appear on the bottom left of any check from that bank. PayPal may verify the account by depositing two small amounts (usually under one dollar each) and asking you to confirm the amounts — this takes a few days.
How to receive money when someone sends it to you
The person sending you money needs your email address associated with your PayPal account. They log into their PayPal account, click "Send Money," enter your email, type the amount, and choose whether to send it as a "Friends and Family" payment or a "Goods and Services" payment. For a refund, they should use "Friends and Family" because it has no fees.
Once they send it, you receive an email notification. Log into your PayPal account and the money appears in your balance when ready. You do not have to do anything to accept it — it is already yours. If the amount is large or your account is new, PayPal may place a hold on the money for up to 21 days, meaning you can see it but cannot transfer it yet. PayPal sends you a notification if this happens.
Moving money from PayPal to your bank account
Open your PayPal account and click "Wallet" at the top. You will see your PayPal balance. Click "Transfer Money" and then "Transfer to your bank." Select the bank account you linked during setup (or add a new one if you did not link one yet). Enter the amount you want to transfer — you can move all of it or just part of it.
Click "Transfer Now" and PayPal shows you a confirmation screen with the amount and the bank account ending. Review it carefully, then confirm. The money leaves your PayPal balance when ready, but it takes one to three business days to appear in your bank account. Weekends and holidays slow this down, so a transfer requested on Friday may not arrive until Tuesday. PayPal sends you an email when the transfer completes.
What to do if a refund is delayed or stuck
If someone refunded you through PayPal but you do not see the money after a few hours, check your email for a notification from PayPal. Sometimes the refund goes to a different email address if you have multiple PayPal accounts. Log into each account you own and check the balance.
If the refund shows in your account but has a hold on it, you must wait. PayPal typically releases holds after 21 days, but sometimes sooner if you complete certain actions like confirming your identity or adding a verified payment method. If more than 21 days have passed and the money is still held, contact PayPal through the "Resolution Center" in your account. Click "Contact Us" at the bottom of any PayPal page and describe the situation — include the date the refund arrived and the amount.
If you do not see the refund at all after several days, ask the person who sent it to check their PayPal account. They can view the transaction history and confirm whether the refund went through. If it shows as sent on their end but you never received it, they may have sent it to the wrong email address. Ask them to send it again to the email you use for PayPal.
Fees and limits on PayPal transfers
Receiving money from someone through PayPal has no fee if they send it as "Friends and Family." If they send it as "Goods and Services," PayPal takes a small percentage (usually around 2.9 percent plus 30 cents in the United States, though this varies by country). For a refund, ask them to use "Friends and Family" to avoid this fee.
Transferring money from PayPal to your bank account is free. PayPal does not charge you to move your own money out. However, some banks charge a fee for receiving transfers, though most do not. Check with your bank if you are unsure.
PayPal limits how much you can receive and transfer based on your account age and history. New accounts may have lower limits. If you hit a limit, PayPal notifies you and tells you how to raise it — usually by confirming your identity or waiting for your account to age.
Using PayPal balance instead of transferring to your bank
You do not have to move money to your bank. You can spend your PayPal balance directly by linking your PayPal account to online stores that accept PayPal, or by using the PayPal debit card if you have one. Some people keep refunds in PayPal if they plan to use them soon for online shopping or to send money to someone else.
The downside is that PayPal balance earns no interest and you cannot use it everywhere. Your bank account is more flexible — you can withdraw cash, write checks, or use a debit card at any store. For most people, transferring a refund to the bank account is the safest choice because the money is then fully under your control.
Frequently Asked Questions
Can I receive money on PayPal without a bank account?
Yes. You can receive money and keep it in your PayPal balance indefinitely. However, you cannot transfer it to a bank without linking one. If you want to eventually move the money out, you will need to add a bank account at some point.
What if I do not recognize the refund in my PayPal account?
Check the transaction details by clicking on the payment in your PayPal history. It shows who sent it, when, and for what reason. If you still do not recognize it, do not transfer it or spend it. Contact PayPal through the "Contact Us" link and describe the situation. Do not send money back to an unknown sender.
How long does it take to receive a refund through PayPal?
If someone sends you a refund, it appears in your PayPal account within minutes to a few hours. However, PayPal may place a hold on it for up to 21 days if your account is new or the amount is unusually large. The hold does not prevent you from seeing the money — it just prevents you from transferring or spending it yet.
Can I receive money on PayPal if I am under 18?
No. PayPal requires account holders to be at least 18 years old. If you are younger, a parent or guardian can open a personal account and receive money on your behalf, though PayPal's terms require the account holder to be the person whose name appears on it.
What happens if I transfer money from PayPal but it never arrives at my bank?
This is rare, but if a transfer disappears, log into PayPal and check your transaction history. The transfer should show as "completed" or "pending." If it shows as completed but your bank does not have it after three business days, contact your bank first — they can trace the transfer using the reference number PayPal provides. If your bank cannot find it, contact PayPal with the transfer date and amount.