When I first opened my Paypal account in April of 2000, Paypal was giving money away. They were paying everyone $5 for signing up and $5 for earch referal that signed up. It was a good gimmick at the time and while it must have cost them millions of dollars, it quickly became evident that the Paypal business model was going to be a huge success. It's like someone once told me: there's money exchanging hands every day - you just gotta reach out and grab some.

And Paypal does, to the tune of $0.30 + 2.9% of each transaction. While the credit card companies surely take a cut of this, not all transactions even involve credit cards. I often fund my account directly from the bank, or just spend money that I've previously received. In these situations, Paypal takes a nice cut for simply subtracting a number from my balance and adding it to someone else's! Now with over 95 million accounts, it's hard to imagine how quickly those 3% chunks add to the Paypal Empire (now a part of eBay).

Thankfully, Paypal hasn't stopped giving away money in the last 6 years. A few months ago, I logged into my account and found that I could place my Paypal balance into a money market fund for free with little effort. Any money sitting in my account would be put to work for me automatically. Paypal claims the fund is one of the highest yielding money market funds in the country and it is currently earning 4.27%. Since I've joined, the average has not dropped below 4% which is excellent compared to what my bank gives me for readily available funds. To cap it off, Paypal also has a convenient debit card with the MasterCard logo that can be used to draft funds directly from your Paypal account. Paypal will even pay you 1% cash back on all debit card purchases.

Of course, the money market fund can lose value and Paypal is not FDIC insured so all you high rollers might want to think twice before you make Paypal your bank of choice.