Paypal – an Interesting Psak


by Rabbi Yair Hoffman for the Sfas Tamim Foundation

In late 1998,  Peter Thiel and Max Levchin founded a company called, “PayPal.” (It was originally called Confinity). Venture capital funding allowed it to combine with eBay transaction partnerships, and PayPal quickly shot up to 1 million users after just 15 months.  With Paypal, people can send money to others electronically – through their email addresses.  There are, however, two ways of sending money on PayPal: Friends&Family (F&F) and Goods&Services (G&S).

F&F is intended for paying a friend back for dinner, for example, or giving a relative money. There’s typically no fee involved, but it also drops protections for any issues that may come up, such as refunds or scams.

G&S is intended for purchases, and money sent this way is subject to PayPal fees which are currently 2.99% of the transaction. With G&S, if what you bought was not as described or if it was damaged upon arrival or it never got to the buyer – refunds are much easier.

PayPal makes its own money in two ways. The first is the fees they charge to a payment’s recipients. Though most transactions are free for the average user, many merchants pay that fee on transactions which is the G&S method. PayPal also collects interest on money left in PayPal accounts. All the money held in PayPal accounts is placed into one or more interest-earning bank accounts. Account holders do not receive any of the interest gained on the money while it sits in a PayPal account.

Is it permitted for a business to take payment for goods and services through F&F, even though it is not what they intend?  Can F&F or the term “friend” be defined as any person that you trust?

The question was posed to Rav Yisroel Dovid Harfenes, one of the leading Poskim in the United States.  [Each person, however, should make his or own inquiries to both Paypal and also to one’s own Rav or Posaik].  Rav Harfenes responded that one must ask PayPal if they truly do not care if a business uses F&F instead of G&S.  If they do care then it will be a problem.  When the question was posed to PayPal, however, they did not respond.

When Rav Harfenes was told this, he responded that it would seem from their lack of a response that it does not matter to them, and therefore, there would be no prohibition in utilizing the F&F method.

***Why not subscribe to the weekly Parsha sheet on Emes published by the Sfas Tamim Foundation?  Each week there are four columns all having to do with Everyday Emes.  Send an email to subscribe to the author at [email protected]


  1. PayPal did not respong because their customer service department is non-existant. I have been urgently trying to reach them for over a year and never managed to speak to a person once. Their rating on Better Business Bureau is one out five stars – the lowest possible score. I would assume from that whoch the choice is left up to your discretion that they do not, in fact, actually care.

  2. steinj:
    In other words, his credentials are fully intact because he does not condone the idolatry and heresy that is Zionism and its “State”.