Merchant and Paypal - Worries?

What is wrong with paypal?

[confusedxx]

I am in the process of setting up a store front and the software I would use supports paypal, authorize net and Worldpay.

I have heard that paypal is dangerous for merchants and that paypal will freeze your account for no reason. The TOS on their site seem to limit your rights to complain and seek recourse. Is it really that dangerous to use paypal? I figure I will make few sales a year - maybe 20 - 30. Each sale is more a high value sale. About 1000 EUROs or more and the goods will be shipped after payment is recevied.

So what is this danger of charge backs that I hear and what about paypal freezing my money and not putting it into my bank?

Who would you recommend for a payment gateway in Europe?

thanks

[edited by: lorax at 3:22 pm (utc) on Aug. 7, 2006]
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[BeeDeeDubbleU]

I have heard that paypal is dangerous for merchants and that paypal will freeze your account for no reason.

There have been cases of accounts being frozen but there is always a reason for this. Whether or not you agree with this reason is the question.

All I can say is that I have been using it for two and a half years without incident.

[Rightz]

There are a few ways paypal will freeze your account. Mainly because a customer complains about you. If you are selling a 'service' or non-ebay item, the buyer has no way get their money back. With an ebay item - buyers can claim they have received their product. Paypal may limit your account for this - but all you need to do is prove you sent them that product - ie proof of postage. It's not your fault if it's lost in the post.

Another way is if the credit card the buyer uses with paypal is reported lost or stolen - their credit card company will order paypal to give them the money back and paypal will charge you a small fee. Very unfair - but pretty unlikely to happen (although it did to me).

Overall paypal is good - and a lot of people use it. I'd give it a try. 99% of all paypal users are happy. It's just because it's a HUGE company that you hear more about paypal than other companies.

[LifeinAsia]

Another issue is if the buyer issues a chargeback through their credit card company. PayPay acts as a buffer between you and the cc company, so you do not get to deal directly with them. PayPal asks you to provide documentation and passes that on to the cc company. If the cc company rejects your explanation, there's no more recourse and PayPal takes the money back (actually, they put a hodl on the disputed amount as soon as the cc company notifies them of the chargeback). If you get to deal directly with the cc company, sometimes you can try to bump the issue higher for a more senior review.

[MrFishGuy]

If you only ship to addresses verified by PayPal, that will cut out 99% of would be fraud.

[Daffy528]

Truth is, verified address by Paypal or not, you are always at risk for chargebacks. Consumers do it all the time, whether they were unhappy with the purchase, or they just want something for free.

The only way to check is to know which paypal customers have a history of chargebacks.

Then you're safe, for the most part.

[evaddnomaid]

PayPal is a solid option, especially when you are just getting started in eCommerce.

If you are worried about PayPal freezing your account, here's a tip: don't keep a lot of money in your PayPal account. If you call PayPal and ask for it, you can have a feature turned on called "auto sweep". The money in your PayPal account will be moved to your bank account daily.

To cut the rate of fraud (a good practice whether you use PayPal or some other payments processor) consider a Web Service to help you detect fraudulent transactions before they are made. Try "Web Services fraud detection" in your search engine.

[Bewenched]

You'd better be able to ship your item and give the customer tracking within 7 days of the payment else they can take the money back even after it has shipped. This has happened to us twice even though we clearly stated on those two particular items that they were special order and would take 10 days to ship.

Also realize that paypal is not FDIC insured like a bank so make sure you do not just keep funds in the account for long periods of time. If they go under (unlinkely) your money is lost.

[evaddnomaid]

Actually, according to http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/fdic-outside:

PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage

[edited by: lorax at 11:42 am (utc) on Aug. 23, 2006]
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[crak_bot]

I used Paypal for a long time (had a rating of 1000+) and never once had a problem. A few customers had issues but paypal was always fair and gave me a chance to defend myself. If I was right they would give me back my money in timely fashion. Of course, with thousands of customers some would fall through the cracks and they got their money back, rightfully so. As a merchant you have to accept that sometimes you screw people, not on purpose, but like I said becuase they fall through the cracks, when this happens you have to admit it and let them have their money back to make it right.

Don't believe all the negative hype around paypal, they have made it possible for millions of people, including myself to become self sufficient.

If you run your business at least somewhat properly you should never have a problem with paypal.

[Corey Bryant]

Paypal is quite large. A lot of people use it. And you will hear a lot of negativity about Paypal because a lot of people use it. Vicious cycle - you grow and the more customers you get, the harder it is to please everyone.

And then of course this is money we are talking about, which is even worse. People tend to get a bit ansy when it comes to money.

As far as Authorizenet.com - that is only an electronic payment gateway (like LinkPoint and Verisign's Payflow Services). You will still need a merchant account and these gateways cater primarily to United States businesses. There are very few merchant account providers (MAPs) in the United States that will cater to merchants not in the United States. You at least need a United States bank account, United States address, and United States phone number to get a merchant account.

As long as you are not doing anything illegal - Paypal would be a pretty good choice. You also might check out the gateway Protx and maybe MAPs like Barclay's

-Corey

[JSebastian]

Grrrrr....I've been burned by paypal before and I speak the truth.

I shipped an order to a customer. Customer claims they didn't receive the item. At this point paypal will freeze the funds. Period-Dot. No questions. (If you ever have issues with a seller this is a quick way to get their attention FYI.) You will then have a chance to make your argument. Proof of shipping is NOT enough. You must have trackable shipping AND a signature if over $300. We did not have a signature and lost our money.

They mislead customers about their policies. There is nothing wrong with using them for paypal. DO NOT use them from credit card processing. Always do your homework before so you don't get burned.

We also keep a limited amount of money in our account. If they freeze it we will walk away from that account and start another until it's fixed.

Good Luck!

[grobe]

Look again at what the OP plans to do: 20 to 30 transactions of 1,000 plus Euros. Why I think Paypal is fine for low volume sellers who sell cheap items (like I do--and I use it), I think it is much riskier for transactions of this size and recommend a regular merchant account.

[Essex_boy]

At that level 1000 + why not oena card processing account?

Looks way more profesional.

[Peter Cornstalk]

Actually, according to [paypal.com...]

PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage

Actually if you read the entire thing you will see that it is contingent on PayPal keeping accurate records.

How much do you trust PayPal to keep accurate records? They don't even know proper security and that is why they are the largest phishing target on the Internet. LOL :)

[farmboy]

You'd better be able to ship your item and give the customer tracking within 7 days of the payment else they can take the money back even after it has shipped. This has happened to us twice even though we clearly stated on those two particular items that they were special order and would take 10 days to ship.

You might want to review PayPal's policies.

I have had people complain of not receiving an item much longer than 7 days after payment on a number of occasions. I simply went to the PayPal resolution center, entered the tracking number and that was that. PayPal has never decided in the buyer's favor against me when a valid tracking number was provided.

And sometimes, unintentionally, I have failed to respond to a complaint or dispute within 7 days and still was able to provide the tracking number and end the dispute.

FarmBoy

[farmboy]

I've been burned by paypal before and I speak the truth.

I shipped an order to a customer. Customer claims they didn't receive the item. At this point paypal will freeze the funds. Period-Dot. No questions.

That's not accurate. They do not always freeze the funds. A factor in deciding whether the funds are temporarily placed on hold is whether the customer files a claim vs. a dispute. This is explained in the Resolution Center at PayPal.

You will then have a chance to make your argument. Proof of shipping is NOT enough. You must have trackable shipping...

A tracking number is proof of shipping and it is adequate.

Other than a tracking number, what other proof of shipping is there that a third party can use to verify the item was shipped and delivered?

... AND a signature if over $300. We did not have a signature and lost our money.

I believe it's $250. Requiring a signature upon delivery for an item with a value in the hundreds of dollars is just a basic prudent business practice regardless of PayPal's policies.

They mislead customers about their policies.

Would you provide links to a couple of their policies that are misleading?

There is nothing wrong with using them for paypal. DO NOT use them from credit card processing.

I disagree. I have accepted thousands of credit card payment via PayPal.

FarmBoy

[Edge]

Paypal does seem quick to freeze money. I have a customer whom purchased 250 resumes views, used 206 of them, and initiated a chargeback. Now we are not talking a lot of money ($15.95), I process about $4000 every month with them. Never the less, I have not been asked for my side yet.

Lots of customers have expressed reservations about PP when making a purchase on my site. My gut feel is that I should investigate other paymment gateway options.

[edited by: Edge at 10:26 pm (utc) on Sep. 2, 2006]

[Lovejoy]

The minute I run into a problem like that I contact PayPal directly and give them my side. In your case I believe digital items are not covered in the buyer protection policy.

[Edge]

I need to read the terms better, because I got a email and the case is closed. I did not even get a chance to dispute and show my evidence. I now can see why some folks complain about PP. In the least, I am going to shop around for a new payment processsor.

Just amazing..

[Lovejoy]

Strange, I get notified immediately if there is a problem with a customer by email and again as soon as I access my account. Not only that, according to PayPal buyers of non-tangible goods are not covered by the buyer protection policy

"The item sold in the listing must be a tangible, physical item or good which can be shipped. All other items are ineligible for PayPal Buyer Protection coverage, including but not limited to intangible goods, services, quasi-cash, gift certificates, and downloadable or streaming content. Motor vehicles (including cars, motorcycles, boats, and planes), and Live Auctions will not be covered. In addition, items prohibited in the PayPal Acceptable Use Policy are ineligible for coverage. If an item does not meet the requirements in this section b.3, it is ineligible for PayPal Buyer Protection coverage, even if the PayPal Buyer Protection Seal is displayed in the item listing."