Coinbase Debuts 'Buy With PayPal' Feature (but Read the Fine Print)

The integration could lead to massive, and avoidable, costs for users who don’t pay attention to Coinbase’s fee schedule.

Apr 29, 2021 at 4:00 p.m. UTC
Updated Sep 14, 2021 at 12:48 p.m. UTC

Coinbase is allowing U.S. users to buy cryptocurrency with their PayPal accounts in a major expansion of the exchange’s funding rails.

The option, announced Thursday, could cost unwitting users substantial sums in fees.

It is also another sign of crypto's increasing mainstream acceptance. PayPal, long coy and standoffish about the sector, began allowing users to buy crypto on its own platform last year and has gradually expanded this service. Coinbase, one of the crypto industry's oldest startups, recently listed its shares on the Nasdaq.

Coinbase users can now buy up to $25,000 in crypto daily using PayPal, according to the exchange's settings page. They’ll lose nearly 4% of such purchases to PayPal-specific fees.

The PayPal integration is the third big-spender option alongside bank buys via automated clearing house (ACH), also capped at $25,000 daily, and wire transfers, which have no cap. Needing only the PayPal login to set up, it could offer users a workaround to Coinbase’s cumbersome linking process for credit and debit cards ($5,000 weekly maximum) and bank accounts.

Buying crypto through PayPal ranks among Coinbase’s priciest payment options (and Coinbase is already notorious in some circles for its high fees). The 3.99% fee is as expensive as debit card buys despite a far higher limit. And it is markedly higher than bank buy fees of 1.49%. Depositing U.S. dollars from PayPal into Coinbase triggers a 2.5% levy; ACH transfers are free.

"The fees cover the costs of payment processing," said a Coinbase project manager, Eddie Lo, through a spokesperson.

A CoinDesk reporter previewed $25,000 AAVE buys on Coinbase using every available funding option. Choosing PayPal, the order would have triggered $959 in fees Wednesday night. (The reporter’s PayPal account is funded by his debit card.) Paying with the bank account tied to that same debit card would cost $367 in fees, for comparison. Paying with the debit card itself would not have worked because of the $5,000 weekly cap.

(The reporter did not execute either purchase. He did, however, buy $5 in AAVE Wednesday to test the PayPal feature and lost 99 cents to fees.)

Coinbase has provided U.S. customers with PayPal sell functions since 2016 and withdrawal capabilities since late 2018. It expanded the option to much of Europe two months later. Cash withdrawals are live in the U.S., U.K., European Union and Canada.

Coinbase said in a blog post it plans to expand the PayPal buying feature to “more countries” in the months ahead.

UPDATE (April 29, 16:26 UTC): Added a quote from a Coinbase product manager and background about the two companies.
UPDATE (April 29, 16:45 UTC): Removed sentence speculating about the PayPal buy option's profitability for Coinbase.
UPDATE (April 29, 16:50 UTC): Corrects byline.

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