Most Common Problems
Any time personal information is transferred online, there is a risk, no matter how secure the site is. PayPal is no exception to this rule. Yet, the most common security problem isn't PayPal's doing. Anyone who knows your PayPal email address has the ability to hack your account.
If you use a password that is meaningful to you and is fairly easy to guess, you are putting your account at risk. Once someone knows your login information, there is little PayPal can do to block the person until you report fraudulent activity. Once in your account, hackers also have access to credit cards and bank account information listed in your account.
The second most common security problem is phishing emails. PayPal does send the occasional email, especially if there have been upgrades or site changes. The key is to remember that PayPal will never ask for your account information in an email. They will also never ask you to login directly from the email itself. Many phishing emails look like the real thing, and most even have the PayPal logo. When in doubt, contact PayPal directly from the main PayPal website. Also, never log on anywhere except the main site.
With all account information for all users being stored on PayPal's servers, it is possible for PayPal to suffer simple data theft. This means someone could hack any server and steal the personal information they want. PayPal takes extreme measures to prevent this security problem, but accounts have been hacked this way in the past.
One final PayPal issue is accounts being mixed up. System glitches do occur, no matter how up-to-date a system is. From hardware failure to an update gone wrong, your PayPal account could be mixed up with someone else's. This means when you login, you will see all the account details for someone else and vice versa. Though you hope you can trust the other individual to wait until the problem is resolved, the truth is, someone else could take advantage of the new finances at their disposal.
Image Credits: PayPal Logo / PayPal.com