Money on hold.

[krimalingding]

So I created an account on PayPal with my sister's name on it, hoping that PayPal is supported by her bank. I sold an item on steam via PayPal and got payment smooth and clear. After a while I found out that her bank DOES NOT support PayPal at all, rather than my sister signup for an account that is supported by PayPal, I've decided that I'll signup instead so that I don't have to bother her ever. Before signing up, I created a PayPal account on my name and tried to transfer my money to the 2nd account. What happens is the money is being held by PayPal and my sister's PayPal account is in Limited Use.

I'm kind of a newbie on how to send money PayPal to PayPal. Both unverified.

[snowshoe]

Your sister will now have to verify her account, meaning link and confirm a new bank account.  As long as the account is limited, it's not very useful.

In order to use a PayPal Account without limits, it must be verified. 

Why is verifying my account important?

All US financial institutions such as banks, credit card issues and 3rd party transaction processors such as PayPal are required by law to reasonably verify the identity of the person behind any and all Accounts into which money is collected. Verification mitigates money laundering and terrorist financing.  PayPal takes advantage of the fact that you had to prove to the bank you are who you say you are.  Therefore, by linking and confirming your bank account, the background work has already been done and PayPal has now met the legal requirements to protect themselves.

PayPal's FAQs state: To Verify your PayPal account, just link your bank account to your PayPal account or be approved for PayPal Smart Connect or the PayPal Plus MasterCard®.  

In addition to a bank account, when you link and confirm a credit card, this acts as additional proof of ID and a backup funding source.

[krimalingding]

So do you think I should use my sister's account, get it verified and abandon my own named account?

[snowshoe]

You need your own account.  Technically you're in violation of PayPal's User Agreement as you opened an accout using someone else's identity.

[krimalingding]

I created it thinking that withdrawal of the money I recevied will be smooth, thought that PayPal is supported by her card.

I did created my own PayPal then transfers the money to it. I would open my own bank account after that then PayPal temporarily holds it.