The main argument for another small bank account to interface with PayPals of this world is not that it cannot fail, but if it does it is an easily survivable event.

Why is it easily survivable any more than Paypal taking money out of your regular bank? If you don't pay it, the bank will come after you.

PayPal cannot take more money out of your account than what is in the account. If you have $500 in an account the bank will not let PayPal withdraw $5000 from it. It's not different from writing a check for $5000, which will just bounce.

The bank is not in the business of allowing overdrafts and then somehow collecting the difference.

  > The bank is not in the business of allowing overdrafts
  > and then somehow collecting the difference.

But one's main bank is? I don't see how the intermediary is any different in that regard?

No bank will honor your check for more money than is in your account. The amount in your account gives a hard stop on the amount you can lose.

Having a separate account with enough for the current Paypal transaction (that you refill from the main bank account as needed, in a few mouse clicks) means you limit your losses from a transaction gone wrong with a major company.

Can a malicious player try pulling money from your main account? Absolutely. But the chances of a large company, like Paypal, hitting you like this on an account not registered with them is zero. And your bank's fraud protection should stop an attempt to pull a large sum from your account by an unknown company in a sketchy country.

The point is to have a bank account with nearly no balance, so PayPal can't drain it, or if they do they don't get much. Then you can transfer cash from PayPal to that account, and then from that account to your real bank.

But if that intermediary bank account has a negative balance, you cannot just ignore it. The bank _will_ come after you for their money. So far what does it protect you?

When PayPal goes to make the withdrawal, the bank doesn't have to let them and give the account a negative balance. Usually you can turn off overdraft and withdrawals will bounce if the funds aren't there.

This doesn't stop PayPal from reversing a previous inbound transfer they decide shouldn't have happened, but it ought to stop PayPal unilaterally deciding they would like some of your money.

So why not turn off overdraft from one's main bank account?