Dec 20, 2010

Using PayPal? Protect Yourself

So one thing I've learned this weekend is that PayPal can get trigger happy. (Actually, my favorite client told me that. And his statement was based on personal experience.)

And though PayPal is quick to file cases for the smallest reasons, they're not always as quick to resolve them, despite all the user's evidence and cooperation . . .

72 hours and counting. Refresh inbox. Refresh inbox. Refresh inbox. No luck; no replies from PayPal.

For you who are wondering what I'm griping about, you can read it here: PayPal Troubles, GCash Store Temporarily Closed.

Anyway, as far as I'm concerned right now, PayPal sucks big time. BUT it's still the biggest and, as far as I know, the most secure network out there for transferring money. In fact, I am forced to admit its trigger happiness probably benefits more people than it hurts.


The good thing about all this is that I've learned a new lesson in life. Here is what I've learned on how to protect yourself from PayPal:

Lesson 1: Use the PayPal Invoice. Whether or not that thing you're selling falls under the buyer/seller protection clause, still always use the PayPal invoicing system. Most customers will let you pass the charges to them anyway. It's still often cheaper and more convenient for them to pay extra charges than get out of the house and pay through a bank.

Now using the PayPal invoice system won't protect you 100 percent, because I've seen stories of people still getting problems with PayPal despite using the invoice system -- heck, in one of the transactions they have on my case, I had used the invoice system -- but it does somewhat lessen your risks. I think.

Lesson 2: Don't keep more money in your PayPal account than you can afford to lose. Never mind the fact that you have to pay 50 pesos every time you withdraw less than 7,000 pesos from PayPal.

If PayPal gets antsy while your thousands are still there, it could suddenly take that money, and you can kiss it good-bye. I say it's better to lose 50 pesos now and again rather than risk losing Php 6,999 in one blow.

If your balance is zero and PayPal suddenly decides to hold some payments that had been sent to you five and a half months ago, then your PayPal account will simply turn negative.

Then if PayPal decides for some reason to send the money back to the buyer instead of returning it to you after the hold, then PayPal might hound you with letters asking you to pay them back for the refund; but as everybody knows, those letters can't really hurt you. (Of course, I'm presuming here that you really are an honest seller, and that the refund was unfair.)

Lesson 3: Upgrade your account to Business. If you're a high-risk user, i.e., you're using PayPal to sell things online, make sure you upgrade your account to Business. After all, it's free.

The reason is this: you are not allowed to have more than one personal account in PayPal, but you are allowed to have a separate business account and a personal account. If your business account gets problematic, then you'll have a personal account you can still use.

But this is the caveat: each account must be connected to different bank and credit card accounts. You can't use for your personal account a credit card or bank account that is already linked to your business account. And you can't remove bank or credit card accounts from your PayPal account if a case is ongoing.

Which leads us to . . .

Lesson 4: Never link more than one bank or credit card account to any single PayPal account. My mistake was that all my bank accounts were linked to my original account, so when I needed to open a new one that I could use, I had no bank accounts or credit cards I could link the new one to.

Lesson 5: Do not link your PayPal account to your eBay account in such a way that you allow PayPal to get funds from your bank or credit card to automatically pay for purchases you make on eBay. This kind of authorization may not only allow them to get money from your bank to pay for eBay purchases but for other things they think you should rightly pay for as well -- such as if your buyer claims you did not deliver a good to them (even if you did) and asks files a case for refund with PayPal. In this case, zeroing out your PayPal funds will not help because PayPal can simply get money from your bank account or credit card.

Lesson 6: Have a UnionBank EON account for PayPal. Whenever possible, the credit card or bank account you link with PayPal should be the one you can most easily close out. A UnionBank EON account is easy to close out.

Lesson 7: For refunds, use the refund button. Unfortunately, this is only available if somebody indicates when he sends you the PayPal funds that he is paying for an item he bought from you. It is not available for personal payments.

But remember: if somebody sends you money, don't send it back, except through a refund button. This is what triggered my PayPal case, I suspect. PayPal thought I was helping somebody get a cash advance from his credit card using the PayPal system.

(No, I wasn't. As far as I know and believe even until now, that person didn't even use his credit card in that transaction. He sent it from funds already existing in his PayPal account. That's what he told me, and that's what I believe until I have evidence to the contrary.)

Lesson 8: Do not use your PayPal while you are in a country different from the one where you registered it in. If you've always used your PayPal in the Philippines, don't use it while you are in, say, Canada. Open a Canada account instead.

Otherwise, they may think somebody in Canada has hacked your account, and they will freeze everything for about three months. (This happened to my favorite client, when he accessed his Canada account from India.)

Lesson 9: Always get a scanned image of a government ID from your online buyer. It should be unmodified. The "Date Created" in the Properties should be exactly the same as the "Date Last Modified." This is such an easy step nowadays: you could take a picture of your ID with a digicam and it's done. Tell them to make it low resolution and black-and-white if they're worried about identity theft. If they're unwilling to give this requirement, they're probably scammers anyway.

So those are my tips for protecting yourself from PayPal. I still think PayPal can be a darned useful service. For one, I could never get paid by my clients without it.

I just wish they would resolve my issue soon -- even just half as fast as it took for them to create it, that would be fine!

Live and learn.

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