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29 November 2016
There are plenty of reasons why more than 192 million people all over the world use PayPal for sending and receiving money online: a globally recognizable and reputable brand name, an easy registration process, low fees, strong anti-fraud methods, iPhone and Android apps, a dispute resolution center, and many others. However, every medal has two sides: while there are many benefits to PayPal, there are also some drawbacks that you should know about.
Account limitations. If your account is not verified, PayPal imposes a limit on all incoming and outgoing payments. The limits vary per country and per user – can see your personal limits by logging in to your PayPal account and clicking “View Limits” in “My Account.” Typically, a withdrawal limit for unverified accounts is just $500. You can lift it by linking your bank account, verifying your credit/debit card information and/or providing your social security number.
Time-consuming verification system. To prevent money laundering and fraud, PayPal uses a verification system that takes a good deal of time and delays your account’s availability. It works this way: when you add a bank account, PayPal sends you two small deposits. After that you need to let PayPal know their exact amounts to verify your account. If you add a credit/debit card, PayPal makes two small charges from your plastic. You’ll need to enter their amounts as well as the adjacent codes written on the card statement. These deposits/codes may take up to 5 days to appear, and during that period of time your account options will be quite limited.
One-sided buyer protection policy. If you are selling physical goods, you’ll have to support the PayPal’s buyer protection policy. It means that if a buyer complains that he or she hasn’t received the ordered item, or that you sell fakes, or that your item description is misleading, you’ll have to prove your fair-dealing. This makes selling goods more complicated because you need to store tons of confirmation documents, from receipts to tracking number slips. However, in many cases, the funds are still refunded to the customer even if they are not right.
Locked accounts. If PayPal decides that you have committed fraud or violated its policy, the company can temporarily freeze your accounts and hold your money. For example, if you have received an amount that is much higher your average or if you have been too active this month, your account can be locked. And it’s sad that there are no clearly defined rules that you need to follow to avoid this problem – the “suspicious activity” term can suppose numerous actions, for example an access via an anonymous proxy service. The fraud investigation process can last from several days to six months, and you can’t use your account during this time.
No outside arbitration. Since PayPay is a privately owned company – and probably located in another country if you are not a US citizen, you can’t file legal complaints when your account is frozen or suspended. It’s up to PayPal how to manage all funds in their possession and how to control their use. If you do not agree with a PayPal’s decision over some issues, you can’t dispute it even if it is unfair and causes you harm.
Hefty transaction fees. If you pay for goods and services online using PayPal, then you won’t notice any fees. However, the situation changes if you accept payments via PayPal. In this case, you will need to pay 2.9% + $0.30 for sales within the U.S., or 3.9% + a fixed fee based on the received currency for international sales. If you sell low profit products, it might seriously hit your wallet. If you send money to your friends or family members, you will need to pay 2.9% + a fixed fee based on the transaction currency. Just for comparison: TransferWise charges just 1%-2% per transaction, without any currency conversion fees.
Withdrawal difficulties. Unfortunately, PayPal doesn’t allow withdrawing money to a credit, debit or prepaid card, just to your local bank account or by check. It can take 4 business days for withdrawn funds to clear in your bank account. Plus, all withdrawals are subject to review and if PayPal notices any suspicious activity or identifies a problem, the company can delay or annulate your withdrawal. If the bank denies your money transfer, you’ll be need to pay a return fee.
Poor customer support. Support is always critical, and PayPal is often considered as a user-unfriendly payment system because of its bad customer service. It’s difficult to find necessary contact information on the site, and there have been a lot of complaints about automated responses. It seems that PayPal takes you in circles to make you give up and don’t bother it with your problems.
Scam schemes. PayPal users are common scam targets. You will constantly get various phishing emails saying that your PayPal account is locked or suspended and you need to click a link and enter your login and password to confirm your data. Of course, you should only log on to the site using the URL, never an e-mail link – otherwise, you can become an identity theft victim.
Low credibility. It can be easy to integrate PayPal into your checkout page and allow visitors to make payments online via this system. However, it can have the same effect as building a store using Wix or Weebly – you will look like an amateur seller. It is better to choose a dedicated payment processor offering PayPal among other payment methods, for example Authorize.net or BlueSnap.
Sending and receiving payments online shouldn’t be a difficult and time taking task! The world of online payments is always evolving. Nowadays, there are dozens of payment platforms that offer the same and in some cases even better functionality than PayPal, so make a pause and look around – you can surely find a suitable solution that will meet your requirements.
Exciting articles several times a month