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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
Having used Paypal for15 + years I have only had one problem as a buyer and that was corrected albeit slowly to my satisfaction.
As a seller I have maintained a 100% rating and although to fees are somewhat higher than desired, the benefit of fast payment and any problem help offsets that for the most part.
Pay-Pal, so far. so good.
Have been a Paypal subscriber for several years, and have had no problems at all. As far as I am concerned, short of EFTs, this is the best way to handle any and all financial transactions.
I have used Paypal for years, mainly as a buyer.
My experience has mainly been very favourable.
However, the one thing that I really dislike is their very obscure "Recurring Payments" system. I often sign up to recurring payments in order to try out some software, but it is very difficult to identify which is which from the second Paypal page where many of them are listed. Not only that but the default setting on the first page is to show ALL, whereas I'm sure most users need to see just the Active. Even after you have switched to Active to find one, the All default over-rides that as you move no to the next.
I haven't found a way to make this any easier, has anyone else?
In the years before eBay owned the company I did buy lots of small items on eBay, mainly DVDs and computer parts. As long as small amounts are involved -below 60 euro- it is great. Your credit card data have not to be exposed to sellers...
But on larger amounts -150 euro or more- be careful. Not paypal is the problem, but some seller of bad will may crack the system of buyer's warranty. Got it twice, around 2005 and once in 2016. Just by waiting to ship your goods and waiting to answer your emails one can pass out the time to file yopur complaint.
Got it in 2016 in a strange way: shipping from U.K to Belgium via a NL post and did not arrive... saw late on the post tracjkng system because the track number was only revealed in a second step and my packet was returned to sender. got never an answer by eBay, got it by NL post telling ""your house number was not revealed". When checking mly eBay address data, my number was there in a second line and my street name in a seperate line above, both not being in same line the packet man could not deliver: unbelivable for anyone knowing NL addresses and Belgium addresses are written ibn same way ANd in same dutch language....eBay handled the complaint that the packet would bve resend after one month, but without a tracking code this time, but never got anything and eBay not refunded me an eurocent of my paypal payment, my complaint on my account was "treated", not in consideration anymore, without any communication with me!!!
So be careful with the more expensive objects and sit on the timings, follow it up and complain within a week and overcry your problem (unless me trusting to much) Better to early and to "loud" with harsh language than too soft moderate like me finally not believed and bully and cheater wun spite the buyer's warranty.
When I tried to set up a paypal account I was unamare that the name on my Social Security card included my middle initial.
I was informed (e-mail) by paypal that I would have to submit a large number of documents to them-more than enough information for identity theft. I didn't have a scanner, I had no intention to provide them with all of the required information and I've only purchased 3 items as a guest through paypal in almost ten years, so I refused to send them all of the requested documentation. I called their customer service department and it was at this time that I was informed that I didn't include the middle initial of the name on my Social Security card. I was informed that my debit card number was banned and I would have ro get a new debit card with a different set of numbers to get a paypal account. I told them that I used paypal very rarely and I had no intention of getting a new debit card to satisfy their demands and I have never used paypal since.
I later received an e-mail message informing me that I was eligible to participate in a class-action suit against paypal because they banned me for spurious reasons. I didn't reply to that e-mail because paypal is worthless.
On one occasion when I payed for a transaction as a guest I sent a money order and discovered that they treated money orders the same way that they treated checks-a waiting period was involved. This is ridiculous. A money order is the same as cash for all intents and purposes.
In conclusion, I believe that paypal is a usurious data-miner and ought to be avoided. I also avoid e-bay for obvious reasons.
Being very sceptical about security I set up a small secondary bank account with limited funds before using paypal.
I have now been using for many years and many transactions and have had no Problems at all.
Simple to use and very quick , great system. 10/10
I have been a PayPal user for over 6 years and have needed to use the refund for non delivery on one occasion with no problems. I use PayPal to pay everything that I can because it means I do not have to be continually exposing my credit cared details to vendors. I have never had a problem with PayPal payments system. 10/10
Have used PP for several years. no problem in the states. Have resided outside the states and have all kinds of issues. First, they do not like foreign phone numbers, do not fit the system, therefore no phone calls or text messages to verify who you are. So then you are suspicious and are locked out. The only way I can fix the problem is to call them, go through a 5 background question quiz and hope that satisfies them. Many banks will email you a code...not PP. Still use it, but a pain in the arse sometimes.
I had trouble with PayPal before Ebay bought it, but not since. I am from Canada, and back then, PayPal would not let me attach a bank account, just a credit card. That meant I could not do business with people who had a personal account rather than a premium or business one. I also had to pay two currency conversion fees, one to PayPal and one to my credit card. Since Ebay bought it, I have had it, I have had neither problem. I just have the PayPal conversion fee, and I am able to attach a bank account in addition to my credit card
I have been using PayPal for many years, and any problems have been quickly solved by the kind and listening people at the support function, I recommend their service for ease and security.
Used PayPal for a non-profit magazine we published for over 14 years. Never had a problem. I keep my info up to date and they make funds fly for me when I make a purchase or donation. Customer service is helpful and they do refunds within minutes.
Whenever terms of service are changed I read the email to see if it effects me. It's a secure online financial service.
I have used Paypal since it's inception without any issues arising. In fact, I now tend to avoid sellers who do not offer it!
It should be noted that PayPal's 2-factor authentication is NOT really 2 factor. It's one of those "We'll text you a Pin to enter" things that are actually worse than save, since they go over the air and go to your phone which you might have lost, or had your phone# changed on your account by social engineering. Do not rely on this method for security.
Two-factor authentication, as implemented by Google and various financial institutes, uses your cellphone. Whether you trust the system is up to you, of course.
I've used PayPal for years without an issue. I sell (and buy) all kinds of stuff on ebay, and for that, it seems perfect. They take a *relatively* small percentage, unlike ebay's predatory 10% cut, which I find outrageous. I pretty much figure 12-15% of any ebay sale will be lost to fees. It's the cost of doing business.
I used to have a credit card merchant account, and THAT was just outright theft on monthly fees and endless little charges on everything, especially if you didn't have the buyer's card physically in your hands (online or mail-order). PP is much better.
A couple of notes:
Those complaining about PP holding your money in a PP account, you can have the entire amount (or just a portion) transferred to your bank account free of charge. Just log in and do it. Or ask for a check to be mailed to you. That's how it works for U.S. accounts, anyway.
And as for PP's beginnings...it is common knowledge that it was originally formed as a way to, ummm, transfer large sums of money around without the government's knowledge due to bank reporting laws. Once it became more successful and the client base grew, that was abandoned.
Thanks for letting us in on the seller’s perspective! This clearly shows how the company generates revenue from a service that is free for buyers.
I used PayPal for several years until I purchased an item that was promoted by PayPal calling for an account credit by PayPal. I never received it. After 3-4 billing cycles I called Customer Support and was told they had changed their system and my purchase ( and credit ) was transacted on the 'old' system. I was assured that the credit would be given to me. Never happened and I have never used PayPal since because they failed to honor their offer, You don't need PayPal to execute secure transactions.
Thanks for your comment! It’s statements like yours that make the comment section so valuable as editorial research can never fully replace hands-on experience from our readers.
I started using Paypal some years ago, only purchased items twice and then they froze my account because they said that suspicious behavior had been carried out and I have never been able to use the account again. I still use the same email address and I think that this is the reason I cannot reuse the account again. So I do not use it, there are others ways to pay for things that you buy online.
Thanks
I've used Paypal innumerable times. No problems to date.
I have been using PayPal for many years, and all (2) problems have been quickly solved by the kind and listening people at the support function.
Recommends the service
IF individual people would read the rules, regulations, Terms Of Use before 'clicking the mouse', and give honest, verifiable information to any financial institution they should go to the web site, ask 1, 5, 10, 100 questions, read the financial reports of the company, check the background of the individual CEO's and financial integrity of the owners to LEARN what the PayPal system does for those who use the system.
Many people still buy a used car, kick a tyre (correct spelling) and pay a fortune to the salesman who tells them, "Trust me, it's a great car".
Some people should check first and READ the information below the mouse cursor instead of clicking madly then blaming the rest of the world for their own mistakes.
You may choose not to publish this comment Sven, but you will read it and agree that it is the truth of the actions of many people.
Of course I'll publish your comment! This section is meant for thought exchange and it would be somewhat strange if we all held the same opinion don't you think?
I'm astonished to hear about so many issues with PayPal as things look very different in the German section of our blog. Perhaps, there are differences concerning service and support when measured on an international scale?
As the Credit Union that I was with would "scan" your accounts - (take from a savings account if your day-to-day account was overdrawn) - I opened an account with a bank and got a Visa debit card that I use with PayPal (or on-line if I need to use a card number). The account has usually less than $10 in it, unless I wish to buy something on ebay. In our local shopping centre I can withdraw cash from one ATM and deposit into another - even at 1AM on Sunday! That way, when someone tried a recurring debit that I had cancelled, it bounced.
Dear Sven, First & foremost a clarification: PayPal started long before it became part of eBay (which, BTW, it is no longer), as a "go-between" for effective buyer-seller payment transactions broker. Only after it smoothed its workflow did eBay consider acquiring it, but found out that it didn't add that much to the bottom line, as buyers would use PayPal anyway, without eBay having to also manage it. Personally, I've been using it from its very early days, more by need (at the time) than by choice (one of my services suppliers started using it exclusively all of a sudden, without any "grace" interval of time for the transition for the customers' benefit; so it was like "use it or be left without a critical service"). Along the years I came to actually like the ease of using it for most of my transactions (actually, it was due to PayPal that I started taking advantage of eBay too). It was also so much easier (and CHEAPER) to send small amounts of money when needed as opposed to wiring them via a Bank account or Western Un.. They also stood by me when my Credit Card was hacked and helped me out (alongside the CC company) with setting things straight and prevent loss of money. They may be kind of difficult to work with when their own policies (or even Web interface) are challenged, but I am really happy they are around and can be relied upon. Good shopping to everyone! Sincerely, Eric Trattner
I'm aware PayPal was already around since 1997 but it only gained a foothold internationally once it was purchased by eBay.
A buyer supposedly using Paypal (Phishing) duped me out of my sale. When I discovered that it was not legit, I contacted Paypal, and I was told it would be looked into, but any follow-up falls on deaf ears. This means that even Paypal is not protecting its logo and character. To add insult to injury The Australian Government was waiting the outcome of the Paypal investigation to do anything themselves.
I have been ignored on all counts, even though I still have the email address and overseas phone number.
Who cares?????
To avoid problems with PayPal buyers who claim that they did not receive their goods always ensure that you send physical items using a "to be signed for service". Otherwise PayPal will side with the buyer and you will lose your item and payment.