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PAYPal is like the mafia is to the construction industry in New York when it comes to online payments. You kind of have to use them if you use EBay … and while it might be convenient because so many people do use them, make no mistake about it … they will end up screwing you over often for their own game. You are absolutely ‘the little guy’ vs. a corporate giant when it comes to PAYPal. Nothing proves this better than the fact that their customer service ranks lower than the DMV and other government branches. If you have a problem, chances are you will not be able to talk to a human being. And the emails you do send will be answered by an automated process which usually has nothing to do with the problem you are having. $200 to many people is a lot of money to lose … it is a big deal to me if I had someone try to scam me out of $200 … but to PAYPal it is looked at as just another bump in the road to making billions of dollars a year off the ‘fleas’ that consume.

I have three examples of this … one buying, two selling. The first example deals with when I was selling gift cards to an online store that were only available in the United States. After selling about 20 of the gift cards on EBay for a $5 profit each card (you just email the winning bidder the code to redeem) … I started receiving charge backs from credit card companies. PAYPal froze my account each time a charge back was issued. Turns out it is very popular to pay with stolen PAYPal accounts if you are doing business on EBay in the UK. So basically someone who has sent out one of those phishing emails, will hijack someone’s PAYPal account and then buy several gift card codes on EBay. Once they have redeemed the codes, they move on to the next stolen PAYPal account. Once the people who’s accounts have been hijacked through phishing realize this has happened, they file a charge back through the credit card company. PAYPal then freezes the funds in your account and reverses the payment to the person who’s account was hijacked. So basically, you lose every cent of the money. I was selling $50 gift cards and was lucky to only lose $200 because of this. I have since stopped selling the cards because it is almost impossible to only sell to verified international addresses due to PAYPal’s verification rules. I could only imagine if someone sold a Plasma TV or something and this happened. They would be out of $4,000 or more.

Currently, I am involved with an instance where PAYPal froze $148 in my account from a Ralph Lauren duvet I sold on EBay. 10 days after the payment was received and cleared through PAYPal, PAYPal froze the money in my account. They would not tell me why other than saying that the buyer’s bank disputed the payment. It COULD be because the buyer said they did not receive the item. It could be because the buyer did not have enough in the bank as if they were bouncing a check. Either way, I think it is ridiculous that this can happen in the first place. You’d think an online payment service would actually have the funds released from the bank and into my account. Also, the buyer did not respond to any of my emails or report a problem with the transaction … so I do not know how this happened and PAYPal will not tell me. I cannot find out who I need to email at PAYPal to provide proof that the item was shipped, there is no number to call and I have read on several blogs that the money can be frozen for up to half a year in these cases while PAYPal ‘investigates’ the claim. Doesn’t help me much as I have a $148 freeze on my account.

If you think it is only the sellers that get screwed with PAYPal, think again. PAYPal has a ridiculous policy regarding counterfeit items. If you buy an item on EBay and it turns out to be fake (which is often the case) … it is your responsibility to prove this. I bought a very expensive sweater that I couldn’t find anywhere from a Power Seller on EBay. It cost me $10 in shipping and the actual item was around $100. When it came, it was an obvious fake. The picture in the auction was of a real sweater, but the fake one that came was ridiculous. I filed a charge with PAYPal who told me that it was up to me to prove that the item was fake. This meant going to a retail store that sold these sweaters and getting a letter from a store manager saying that he examined the item and that it was not authentic. Basically, no store would ever do this. Finally, I got the seller to offer me a refund after threatening to take legal action against them (a bluff). They told me that I would have to eat the cost of initial shipping as well as pay to send the item back out of my pocket with a shipping service that had a tracking number. This is PAYPal’s return policy. So basically, to return a $100 sweater … it cost me $20 (shipping to and back.) Even though the sweater was counterfiet, it cost me $20 to find this out. I was lucky however because some people wouldn’t even get $80 of the $100 back because it is impossible to classify the item as a fake as most stores will not do this authentification for PAYPal’s ‘investigation’.

I feel that most times, PAYPal does work as an online transaction site. The fees are growing astronomical, but the benefit is that everyone has PAYPal. Because EBay owns PAYPal, there will probably never be another site as widely used. There is so much identity theft and credit card fraud on the internet, PAYPal offers people a way to pay individuals without sending a check or a money order or giving a credit card to a site which may be compromised. However, it does make me uneasy to know that overall PAYPal protects you from this fraud … at the cost of a giant company that cares nothing about its customers and doesn’t offer a single shred of anything that resembles customer service. They have incredibly long and confusing buyer and seller agreements (almost Willy Wonka ish in terms of their length and language) that seem to always provide PAYPal with a loop hole to screw you over.

I’ve resigned myself to the fact that PAYPal is like the mafia in that if they want your money … they will take it. I have had 3 instances where I did nothing wrong and PAYPal took my money (someone with a long history on PAYPal) and gave it to someone with a very short or new PAYPal history, who figured out how to work the system. Any time someone files a dispute, I just kiss that money goodbye and know not to expect to be protected by PAYPal’s VERY shady ‘Seller Protection’ or ‘Buyer Protection’ plans.

There are always loop holes which get around the agreement saying that the type of item, the address of the buyer, the method of the way tracking was obtained, etc. doesn’t follow their rules. Once, I had a buyer of an item from England say that the item was not received. I had a US Postal customs tracking number which indicated that the person had refused the package because of the import taxes so they were holding the package until the taxes were paid … PAYPal STILL rewarded the full cost of the item plus shipping to the buyer because they said that a US Customs Tracking number was not proof that the package was sent. They needed a US Postal Service tracking receipt, which would have cost $20 to add to the shipment. It would be pretty silly to pay $40 to ship a $50 item to someone (as much postage as they paid for the item) when it could be shipped for $10 just because the tracking numbers went through customs instead of the postal service. You’d think that tracking would be easier to verify through customs because it requires the buyer to sign something if they accept or decline the shipment. Another $60 lost to PAYPal.

PAYPal should make all of its users have a ‘confirmed address’ … which is the only way that they will cover a seller. Even with the confirmed address, there are still ways PAYPal can slip through the guarentee … but you still at least have a chance of getting your money back. A confirmed address is a shipping address that matches up with the address of the credit card being used and bank account being used. Many people do not have a confirmed address (I’d say 1 out of every 5 people I do business with on PAYPal have a confirmed address) and that voids the seller protection plan. Are you confused yet? Just call PAYPal if you want it explained. Wait … they don’t have a customer service number.

I think PAYPal is a necessary evil if you use EBay … but I always have to hold my nose while I use it. I hate PAYPal … I hate its policies … I hate the fact there is no customer service … I hate the fact that there are so many phishing emails trying to steal your PAYPal password … and I hate the fact that they charge you so much in fees to use it. Especially given the fact that those fees basically don’t go towards anything other than pure profit … no customer service, seller or buyer protection, etc. I’d be amazed if it didn’t go to their huge legal team because there are probably a LOT of lawsuits.

In terms of reliability of accepting payments online … it is pretty reliable if you take out the charge backs and the buyer disputes. Overall, I’d say in 3 years I’ve paid about $1,000 in PAYPal fees and lost about $500 in merchandise that was charged back or disputed unfairly. So my yearly cost to use PAYPal is about $500. Definately not cheap … but for the 500 or so transactions I do per year, worth it. It is frustrating, but necessary.

In terms of security, I do know there are plenty of scammers out there who can hack into your computer and PAYPal account. This makes me a little uneasy. PAYPal won’t do much to protect you from an account breach unless you have a problem which you can dispute through your credit card company. The biggest difficulty is distinguishing actual PAYPal emails from the fraud emails that try to password phish. The emails from PAYPal look exactly the same as the fraud ones. I think most people would know not to type their information into any link from an email that says it is from PAYPal, but older and less computer savvy or younger and more trusting PAYPal users do it all the time. Which costs them thousands and sellers hundreds.

PAYPal has a couple of different options where you can receive money. With a regular account, you can receive instant money if the buyer uses a bank account or funds in their PAYPal account to pay for an auction. Most people don’t have their PAYPal linked to a bank account or don’t have the funds in their PAYPal, which means they are paying with a credit card. In order to accept a credit card payment with a standard account, PAYPal will hold the payment until it clears through the credit card company and will charge you a little extra for this. If you upgrade to a business account, you will be charged more money for each transaction (credit card payment or not) it is a few percent higher in fees … but if you have a business account, the credit card payments are immediately released into your PAYPal account. You are also protected by the seller protection plan with a business account, however as I mentioned there are a lot of loop holes.

Overall, I really wish I didn’t feel like I had to take PAYPal. There are no other reliable and easy online payment services that let buyers send payments for free. PAYPal’s fees are higher but the fact that most buyers of auctions have it because it doesn’t cost them anything makes it almost worth it because you know most buyers on EBay do have PAYPal making the transaction go through easily. I believe EBay is requiring all buyers to have PAYPal soon and checks and money orders will no longer be acceptable in terms of a payment. I wish I could say not to do PAYPal because it has no customer service and all the loop holes which you might end up losing money because of. But overall, there really isn’t much alternative, so deal with it. I find a punching bag is a necessity to have with PAYPal because when you do get screwed over or see the large fees being charged or PAYPal freezes your account for weeks or months because of a buyer chargeback, the punching bag will help relieve stress.

Somewhere Don Corrleaone is sitting there counting his PAYPal money.

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