I have my PayPal as a payment option in my account settings, but my credit card as the preferred payment method. Do i need to put PayPal as the preferred method in order to buy/sell gear on the RMAH?
No, you should be good to go. Just have to have it connected i believe.
You need to also have a phone setup for SMS alerts, it is just another way they can make sure you are doing the selling/buying.