They take our money put it in a big account and then proceed to earn interest off this money. Some banks go as far as to take your money, and trade it in the stock market and other investments. Now this Concept is nothing new in the field of banking. Yes it sucks that they do this, and yet they only offer us a low 2% to 4% interest in saving accounts, and then 6% to 10% interest on CD’s, higher if you are lucky. But the really sad part of it, is that most banks can make in the upwards of 15 to 20% or higher on this money via their investments.

Now the really cool part, or as I should Say Disturbing part about this, is how Paypal has been able to avoid being classified as a Bank. They have done this feat with amazing tactics, planning, and persistence. Because of this they are able to use our money without the FDIC breathing down their backs, and it gives them a greater leeway and freedom that banks don’t have. For instance they don’t have to keep a set amount of money on hand in case of with drawls from their account. Normal Banks are required to keep a fairly large amount (I don’t know the amount off the top of my head), to cover the daily transactions and insure there isn’t a total bank failure like there was in the depression when the banks had no cash on hand, which was a result of the bottoming out of the stockmarket(because the banks had peoples money in it).

This article from CNN mainly talks about the in’s and the out’s of Paypal, and how it has little affect, supposedly, on Paypals profits.

Read The Article From CNN Money

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