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PayPal - An easy way to send / receive money online
Member Name: Deru
Date: 13/10/07, updated on 13/10/07 (562 review reads)
Advantages: Easy to send / receive payments, Free to use shopping cart, Buy Now buttons
Disadvantages: Fraud / Scams, Unreliable Buyer / Seller Protection, Can be an unethical company, Fees
PayPal lets people send money from a credit or debit card into another PayPal account as payment for goods or services. Money in a PayPal account can also be sent to another account as payment. You can use Visa, MasterCard, American Express, Switch, Maestro, Delta and Visa Electron cards with your PayPal account as well as add money from your bank account.
Registering is easy. You are asked for the usual details such as your email address (you can add about 5 emails to your account later), password to use, name, address, telephone number and country, as well as the type of account you require. I had no problems with this but I guess it’s all standard procedure nowadays.
There are three account types that you can have and they are Personal, Premier and Business. Personal accounts do not incur fees but you cannot receive card payments. The Premier account is the most common and allows for all types of payments but a 3.4% + 20p charge is deducted from whatever amount you receive. Business accounts are for businesses and fees can be lower if you seller enough to qualify for lower fees.
The PayPal website is secure, indicated by the “https” at the beginning of the address in your web browser software’s address bar and the padlock (and yellow address bar in some browsers). When you first register, you are limited to how much money you can send and receive. It varies from user to user. Some users can send nothing until verification is completed. The verification procedure known as “Expanded Use” involves you giving PayPal your card details; they debit a small amount from the card and you tell PayPal the four digit numeric code under the debited amount on your statement to prove that the card is yours. The debited amount is credited to your PayPal account if you return the correct code.
If you register a debit card, two amounts between 1p and 99p are deposited, which you then tell PayPal the two total debited. There’s a similar check for credit cards. It usually takes 3 or more working days for the amounts to show up and people who do not use online banking to view statements will need to wait for their bank statements to arrive in the post! I don’t mind this since I use Internet banking and unless other payment processors, I like how PayPal actually give that money back. Most other companies keep the security amounts!
When you add or change an email address, you are asked to confirm the email by clicking on a link in an email to confirm that it is indeed yours. The site also times out after a certain period of inactivity, which is a good security measure, especially if you forget to log out on a public computer.
For some changes like your name, you will be asked to fax a copy of a recent bank statement with a photo ID to confirm your identify before they can change them. They now also do a telephone check where their computer phones you, you pick up the phone and dial in a four digit number that you read from your PayPal account to confirm your account. These security measures are a bit annoying but they’re there to prevent fraud, or at least some fraud as there’s still a lot of fraud on eBay using PayPal such as stolen cards, fraudulent charge backs, etc.
The site looks very professional. Navigating is very easy as the main functions are divided up into sections via tabs at the top of the site (when logged in). The sections under ‘my account’ are the overview of recent transactions, add funds, withdraw funds, transaction history, access the resolution centre (transaction disputes) and update your profile. At the top, you can also choose ‘Send Money’, ‘Request Money’, ‘Merchant Tools’ and ‘Auction Tools’. Send and Receive Money are pretty self explanatory options. All you need is the recipient’s email address to send money to or their email or to request money from them. If the other person doesn’t have a PayPal account, they can claim the money that you send by or pay your money request by signing up (or even without signing up for paying now). Merchant tools are tools such as Buy Now buttons, PayPal Shopping Basket, Subscriptions and Recurring Payments, Donation buttons, etc. to let people buy off your site. These features can be integrated with your own website so buyers can shop on your website, which I think is brilliant. Signing up with payment merchants like WorldPay or a bank can be expensive with something like a 4% per transaction charge as well as an annual fee but the tools are free with PayPal. Lastly, auction tools are things like logos for eBay and other auction sites.
Accepting payment is no good if you can’t get that money into your bank account. You can withdraw it after adding a bank account. Withdraws cost 25p if withdrawing less than £50, but free if more. Usually takes around 5-12 working days for money to get to your bank account, which I think is pathetically slow. With Nochex, transfers take only 3-4 working days.
You will receive an email for every transaction that occurs through your account, such as send, receive, withdraw, add funds, request money, etc. which is one of the great things about using PayPal. It lets you know what’s happening all the time. Emails telling you have received money means you know when to post out items you have sold (assuming you check your emails regularly) but it makes managing your business much easier. If you’re a seller, seeing “Payment Received Notification…” in your inbox is a nice sight.
The site is usually fast and reliable. There have been instances where the site was non-accessible for short periods of time for unknown reasons but it’s rare. There was also a time when you couldn’t send International payments if paying via eBay checkout. The site is unavailable during routine maintenance times but they usually warn you in advance, but overall, I think the site is very reliable and speedy.
The thing that irritates me most with the PayPal site is when sending payments, despite setting my credit card as the Primary funding source for payments, it still defaults to funding payments using my bank account. I have to change it each time by clicking the ‘More funding sources’ link and then confirm the change when they try to convince me that it’s better and safe for me to send money straight out of my bank account (yeah, right!). This is their attempt to lower transaction fees and it has caught me out quite a few times. It is known to be safer to send money via a credit card because of the extra protection you get from the credit card company in case something goes wrong. If someone were to forget to change the funding source and the money is taken out of their bank account, they could get overdrawn as many people use a credit card for spending before they’ve been paid. This funding source problem only seems to be a problem when there’s a bank account registered but this is required for withdrawing money, and removing the bank account seems to undo one of the verification steps so I wouldn’t eventually be forced to re-register my bank account and face the problem again.
BUYER / SELLER PROTECTION
PayPal is heavily advertised as a safe payment option. Buyer protection is PayPal’s insurance for buyers so they can recover money if something goes like if a seller doesn’t deliver goods or if an item received is significantly not as described. You’re only covered up to £500. Not much cover if you’re buying something that’s £1000 or more but enough for most items.
So if you’ve been scammed by a dodgy seller, you’d be able to claim back up to £500 through PayPal for eligible items, or so they say! I once bought a PDA on eBay for £200 but unfortunately, it never arrived and it wasn’t despatched via a traceable method. I opened a dispute via PayPal and proceeded with some communication with the seller. The seller was not able to provide tracking details so the dispute was closed in my favour. Great, but after two weeks or so, PayPal only managed to refund me just over £80 so it seems the buyer protection isn’t all it’s cracked up to be. It’s better than nothing but I’ve read that some people only manage to recover a few pennies so I think you can’t rely on this protection. I recommend going through your credit card company to get your money back if it ever happens to you rather than PayPal unless it’s a small amount.
To qualify for seller/buying protection, the transaction must be within UK or between UK and US or Canada. This isn’t particularly good if you want to sell to any other country. People can register with PayPal in 190 countries, yet the majority of countries are not covered? If they can allow registrations in those countries, then they should be covered. A buyer must also have a confirmed address to qualify but unfortunately, not all buyers have confirmed addresses! A lot of new users will not have a confirmed address so these transactions are not qualified for the protection. Items must be sent via traceable means such as Recorded or Special Delivery or via a courier such as Citylink, DHL, etc which is fair enough, to prove that an item has been sent.
A lot of fraud goes on via PayPal. I know someone who sold a phone and the buyer paid via PayPal but insisted on collecting the phone. A day later, the money was reversed by PayPal (probably a stolen card). Problem with this transaction is that PayPal needs a tracking number from the seller to prove that a seller has sent an item and to prove that an item has been delivered. Collection obviously doesn’t fulfil this requirement so one should not accept PayPal and allow collection for an (expensive) item. If a seller doesn’t send an item via a traceable means, then they will automatically lose any disputes filed against them because they cannot prove an item has been posted or delivered.
When a buyer files a dispute against a seller for an item not received or significantly not as described, if the transaction qualifies for seller protection, PayPal will freeze the money or the account to look into the case. Many times, the buyer is the scammer with a stolen credit card and sellers have lost claims because the address is not confirmed or there’s no tracking information. As a result of this, the seller has sent the item because he/she thought the money had been received (which it had) by the time, and the money is taken back from the seller. Seller Protection is no where near 100% reliable and nor is buyer protection. I’ve been stung once where a buyer bought a few items from me but the card they used turned out to be stolen so PayPal just took the money back from my PayPal account. Luckily, they were non-tangible items so I didn’t lose anything. I have heard of successful cases for the seller but a lot goes on.
Charge backs also occur daily. This is when a buyer claims that goods have not been delivered or they are not as described) so PayPal reverse the money. There are many cases where fraudsters file charge backs after receiving goods to get their money back and even though there’s some evidence to show that the fraudster did in fact receive an item i.e. positive feedback left on eBay saying ‘item received’ or something, PayPal will not accept the feedback as evidence against the fraudulent claim. Even if a fraudster receives a flood of negative feedback on eBay, crying fraud, PayPal may still let the scammer get away with things, which makes me wonder about PayPal’s employees and their methods.
Lastly, not PayPal’s fault but a lot of ‘phishing’ or spoof emails or ‘fake’ emails appearing to come from PayPal are received by millions. These emails claim to be from PayPal and may look convincingly so but are really sent by scammers trying to trick you into giving them your log in details, PIN, address, etc. They ask you to click on a link in the email and sign in to verify your account or you’ve received/sent a payment or something fishy is up with your account and to log in to resolve it. Most of the time they scare you into signing in quickly with things like your account has been frozen or someone has filed a dispute, etc. PayPal and eBay scam emails have been ranked the most common, even more so than fake bank emails. Although these are not PayPal’s fault, PayPal users do need to be more careful of these email scams.
HELP AND SUPPORT
Most questions can be answered by looking at the Help section. If you cannot find an answer, then you can contact PayPal via email. I seem to receive replies within 24 hours. The support staff are very professional and helpful when I contacted them but I hear they are much less helpful if you have account problems like your account being frozen as most staff have no authority to do anything. Another thing is that I’ve read a lot about PayPal freezing accounts of people whom sell high profile items like mobile phones, iPods, etc. and requesting documents such as supplier invoices, personal documents whilst the seller’s money is frozen in the account (maximum of 6 months on hold). Many of these sellers a genuine sellers and this can take a long time to sort out with PayPal.
They also have been known to use a lot of stall tactics such as request more personal documents, for tracking documents to be scanned in and sent to them, then taking a long time to process the documents for accounts to be unfrozen. This, aside from being an inconvenience to some can be very distressful for others trying to run a business and rely on the PayPal account for a living and relying on the money (now frozen within the PayPal account) to pay bills. Millions of pounds / dollar / etc are frozen in PayPal accounts each year so they must be earning quite a bit of interest from this unethical practice.
GOOD POINTS –
- Flexible (add many email accounts, credit/debit cards)
- Quick and easy transactions (other than withdrawing and loading)
- Email notifications for everything
- International transactions
- Convenient for both buyer and seller
- Sellers can post out goods immediately since they receive payment immediately
- Easily integrated with eBay listings
- Easy DIY website integration
BAD POINTS –
- Too much fraud going on. Many do not trust PayPal anymore.
- Longwinded verification process
- Possibility of charge backs.
- Poor Seller Protection
- Poor Buyer Protection
- Slow withdrawal time (5-12 days)
- Slow to add funds (around 5+ days)
- Email scams (email spoofs)
- Unethical practices
- Poor communications and useless staff when it comes to certain problems
- Won’t default to credit cards if you have a bank account registered
Overall, I do recommend PayPal but only because so many buyers prefer to use it on eBay and because I like how easy it is to pay for stuff and how they let you create your own e-commerce site with their buttons without additional charges. I dislike the 3.4% + 20p fee but it’s fair to say that the fees from a merchant account would be even higher and not having to pay annual fees with PayPal is a good thing. The unreliable protection and possibility of being scammed are things to watch out for but educating yourself on the risks and being vigilant will often help you avoid them most of the time. Rival payment services work great too but PayPal seems to be the most popular among buyers, which is why sellers and merchants use it. Main reason for my wanting to use it to send payment is that it makes paying for stuff so easy. So easy in fact that it’s bad for my bank balance! If a website accepts PayPal, then all you have to do log in and click ‘Send Payment’. It means you don’t even have to enter your card details! The main reason for accepting it as a payment method is mainly because so many people trust and use it on eBay. To be honest, I’d be happier accepting Nochex payments if more people used it since it’d be cheaper than PayPal but due to the eBay and PayPal monopoly, I can only go with it. I do admit it makes receiving International payments much quicker and easier if not for the slow withdrawal time.
Thanks for reading!
Summary: Easy to send / receive money but need to be careful.