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I'm always open to reader suggestions so this week's article is about PayPal, one of the world's biggest online payment services. What is PayPal, what are the advantages and how do you use it? How much does it cost and what do you need to make payments through PayPal? What about security? Why does the payment behavior of family members matter? And of course: what disadvantages and criticism apply?
History and goals
PayPal was originally acquired by eBay and used to pay for items bought on their platform. They we're looking for an easy and fast way to transfer money from buyers to sellers without having to go through bank account or credit card numbers. That was one of the primary benefits of the technology: payment could be made without relaying one's banking information to the other party. Furthermore, there'd be no waiting period between the start and end of a monetary transfer as the requested amount would immediately show up in the receiver's account and shorten delivery times in the process. If you've ever waited for a shipment, you'll know that every day counts!
How it works
PayPal is a virtual bank account that acts as a broker between you and payees knowing both your banking information and theirs. The process is as follows: you make a purchase, PayPal remits the due amount to the vendor and then debits your bank account. All you need is a checking account or a credit card that holds the required amount and an email address. Once you register with PayPal, your identity is verified. If it is valid, your solvency will be checked. Since PayPal administers advance payment (the receiver already has the money before your account is charged!) this is a must. Once you pass the check you can pay online through PayPal. Every transaction is instantly confirmed and payable sums are then debited from your account. There's no more need for bank account numbers or pin codes, all that is required is your email address and PayPal password.
Also available as a handy app
Benefits
Vendors never learn your banking information as PayPal pays them out of their own pockets (lending you money) and then takes the sums out of your account. This prevents any misuse of customer data as it frequently happens. Having an account and making payments is completely free of charge for buyers. However, recipients / vendors have to pay transaction fees (more on that here)! Buyer protection is also important: if you receive a faulty item or no item at all, you can contact the seller through PayPal. Unless the conflict is settled in a set amount of time, PayPal will give you your money back plus shipping costs. PayPal will also reimburse you for any unauthorized payments, e.g. if your password gets stolen. Payments in foreign currencies are also supported but may incur small fees (depending on the currency). Users receive email notifications for all transactions and there are apps available for practically every device (smartphone, tablet, etc.)
Security
PayPal prides themselves on their security methods. Aside from the obligatory SSL encryption on their website and their money back policy for hacked or misused accounts, PayPal also offers two-factor authentication via security keys that generate new codes for every purchase. An optional customer service pin code furthermore enables users to authenticate themselves via telephone for quick help in the event of a crisis. Still, users should keep in mind that they share in the responsibility by creating and safekeeping a strong and secure password. The knowledge that unauthorized transfers will be fully reimbursed by the company is comforting though.
Faster and easier than online banking
Criticism
Time and time again, there have been reports that saving up money in your PayPal account can lead to issues. While buyers care very little about this vendors (who tend to build up reserves in their account) pay very close attention. Accounts can be frozen for up to 180 days whenever PayPal believes to have detected suspicious behavior. To be fair, according to my research, these cases seem to be getting fewer and PayPal's support sorts them out quickly. Good for them. Unfortunately, politics can also play into this. Various accounts were frozen because they were either blacklisted by the US Department of Homeland Security or their owners' names resembled that of suspects. Accounts held by WikiLeaks or Cuban vendors were frozen because of political pressure. Most absurd however is PayPal's tendency to freeze accounts that belong to family members of locked out users - this practice is reminiscent of collective punishment.
Conclusion
For buyers, PayPal is a great thing. There are no fees, accounts are quickly set up and online payments become a lot easier. 290 million users already rely on PayPal and cases of misused or frozen accounts are rare. Naturally, the thought remains that the company collects user data on a massive scale and demands fees from sellers - which they in turn will include in their pricing, naturally. Issues do occur but are usually sorted out quickly ever since PayPal ramped up their support efforts. If you're a frequent buyer on the Internet and you can live with the aforementioned criticism, PayPal could be a useful payment method for you.
What I would like to know: do you use PayPal? What are your experiences?
Pic 1, 2: Paypal Media Resources
I only use Paypal when I absolutely have to. This is for 3 reasons.
1. Their money back protection did not work for me because of 'insufficient proof' of defect on a second hand item which did not describe the illegal damage to a second hand tyre I bought. I gave plenty of proof.
2. Their charges are high if selling something of quite high value, considering that this is on top of ebay charges.
3. They, like many companies, have strict terms and conditions which have become even more bullying recently, not even giving us the liberty to state that we would prefer alternative payment rather than Paypal.
I have used PayPal for about 10 years mostly as a buyer but occasionally as a seller on eBay without any problems. One comment noted that money received from PayPal for a sale on eBay goes into your PayPal account rather than directly to your Bank Account. This is true BUT the money is immediately (instantly!) available to you to transfer wherever you choose. I suppose it could be an issue if you had to do a daily transfer but for normal use it isn't a problem. I would add that UK users should be aware that they do lose the normal Credit Card protection of the relevant UK Finance Act by using PayPal because PP breaks the direct connection between buyer/seller (needs bringing up to date!) BUT PayPal's own buyer protection offers similar benefits which I have used on occasion - PP are very good on that BTW. For me the benefit of not giving my financial details to a totally unknown seller outweighs any disadvantages.
I will never use PayPal because I will never give anone access to my banking information. I ONLY use a credit card for online purchases because I trust it more than PayPal to resolve any fraud that occurs.
I've used Paypal for years, but only as a buyer, and with a credit card...rather than debiting my linked account. Also, only in the U.S. It's always worked well for me, and satisfactorily resolved issues with purchases that proved to be "not as described".
As a buyer, I use PayPal whenever it's an option; the fewer online merchants who have my credit card account number, the better. I won't go so far as to register my bank account with PayPal since there's no protection against fraud like there is with a credit card. I've used PayPal for several years and have never had a bad experience.
Rob Gordon
United States
I have been using Paypal tor 3 years or more, and have not had any problems so far, I have not had to use their 180 day claim period, so my experience with this aspect of Paypal is nil. All suppliers have delivered on their products in a reasonable time and manner.
I have been using PayPal for 7 - 8 years on a regular basis and never had a problem.
I gave all the relevant monetary and personal details they required when I opened my account in an honest and straightforward manner.
Two of my USA accounts are deducted automatically each month and my many Ashampoo products were purchased using PayPal.
I had an account with one company with an automatic deduction which I closed but inadvertently didn't advise PayPal, I had the details, contacted PayPal and they refunded the payment without question.
I have sold goods on eBay and returned faulty goods through PayPal, received prompt payment and refunds in a timely manner.
Australia's banks have proved to be untrustworthy in recent times and to date PayPal have proved to be the opposite since the day I opened my account with the company, and, many family members and friends use PayPal, without faults or problems.
I've been using PayPal for probably 15 years, almost exclusively as a buyer. I have never had a single problem of any kind with PayPal. Also, I have learned recently that PayPal is making it even easier to replenish your account. I support PayPal 100%.
Yes I use Paypal , and have had nothing but great service from them. The ability to use it with other companies other than Ebay is a great advantage.
I use Paypal regularly. I've had no problems with them and find their system worthwhile. Paypal is preferable to entering Credit/Debit card numbers repeatedly, their security system appears sound, and payments are processed quickly. That's my experience.
hi i m wasib from pakistan,i m online Quran tutor and i want to use paypal in pakistan.i m facing problem of fee from my students.can i creat an acount of paypal in pakistan?
You may want to try to create an account. To my knowledge, Pakistan is not among the boycotted countries. Cuba is a different story though. :)
I have been ill for over a year and have found it convenient to purchase many things through eBay, consequently using PayPal for payment - I had been infrequently using PayPal at various times previously. This has proved very convenient (apart from the many savings I have had by finding bargain offerings on eBay). Both services, for me, have proved to be excellent and totally reliable.
Problems have arisen a number of times (not with eBay or PayPal themselves) and, accepting one that took several days to resolve, have otherwise been satisfactorily and speedily resolved with one phone call. There have been two attempts to hack my account, despite the great care I exercise, and PayPal recognised and resolved them before I even knew they had occurred and both were some time ago. I've received a few fraudulent emails claiming to be from PayPal, but these have always been obvious frauds - PayPal's protection measures work very well (again, these have not been recent).
I have sold a small number of items through eBay and this is the source of my only complaint. When you make a purchase, PayPal efficiently withdraws the charges from my cheque account: but when I make a sale, PayPal retains the money for my future use rather than returning it to my bank account. I have yet to explore whether this can be changed as I'm not happy with my money sitting in their account. Do other people also have this complaint?
The bottom line is: PayPal works! I live in Chile, and I have had several headaches with wire transfers to my local bank account. Sizable sums of money have bounced around until they were returned to the sender. This, of course, is not the idea. So, I am an unwavering user of PayPal and am thankful for its existence.
Nevertheless, I am charged a 7% commission, which is no small change. I guess the best deal would be of someone dropped out of the sky every time payday came around and handed me the cash!
I've used Pay Pal For several years and several transactions with no problems.
I have used Pay Pal (p/p) for 6 years now. I started out on Ebay as store so basically was mandatory. I since dropped Ebay as a selling Platform as the few times I paid my monthly account their Directly my banking information was hacked and kept getting new cards. Back then if you had disputes on Pay Pal /Ebay 5 members would judge the out come 3 P/P employees 2 Ebay and never they would side on the stores behalf . I found this out when filed suit on Ebay.
I also had P/P as my payment method on a stand alone web site , as well as a credit card company. That became to expensive with added on charges every month .
Recently I have started selling retail and at 'Farmer markets . once more I opened a bank charge company. I currently have claims in on my bank for over charges and even a 250.00 close out charge today for a account never used. I have gone back to using P/P as my main source of credit card taking as the 2-3 % I am charged for my small amount of sales compared to the monthly charges of others regular banks.
never had any of my accounts frozen but they are relentless if P/P wants monies during any dispute/ You will need to put a Block on them while it is disputed take it off when settled.
Also customer service is okay BUT !! call during USA business hours . Immediately request a USA Representative, Do Not repeat do not allow the Philippines out sourcing to handle any claims they will always side with a buyer not seller.
I was told this by a P/P manager as well, they do not want lose the customer and chances are the business will still stay and eat the loss. Not only you should support USA workers as well.
so in the 6 years I have had issues with P/P mainly when Ebay was involved and only if in the Philippines location handling it . " we are in the Philippines come get your money" on a Ebay compliant -P/P . That was the closing of my Ebay and my bank as well as I did file a law suit .
They Pay Pal are also no longer owned by Ebay as they were losing to many Commercial accounts since that sale years back I have not had the issues i did when Ebay owned them Directly.
In short they are good for smaller "start Up stores" or if you do under 5000 a month retail sales.
I hope this helps if you are deciding on picking up P/P for your stores
Frankly I would not use paypal. Firstly they do not secure your payments, I know of several cases where money has not been received . Further, they do not accept laws of the EU in as much as the EU have stated that bank account addresses do not need to be in the same state as the client eg a UK pay pal account, a barclaycard platignum uk account registered to a french address. The EU says it is good as does the L authorities. Not though paypal. Barge poles and pay pal come to the fore. NOT SECURE!