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I have had this same problem myself - after initially making an error I had to do something non-intuitive to get the payment to go through, but I don't remember what. I do remember thinking, I should write this down in case I have to walk someone through the process!
Can anyone help? Thanks in advance.
I can't believe Paypal can't be bothered to prompt customers that you need to enter the card # without spaces! I've sent an email suggesting that they provide a prompt. I can put a note on my own site, but that will be 2 screens away from where they need to enter the card info, and it will look clunky at best.