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Paypal
A History Lesson
In the beginning, there was eBay.
And Paypal moved upon the face of the void and cried "free credit-card payments!"
And there was much rejoicing. And like all good things, this came to an end, but Paypal still offered free Bank Transfers, and the multitude were satisfied.
And it came to pass that the Lords of eBay did take possession of the land of Paypal. And they said: "It is good". And yet there was consternation amongst the multitude, who feared the coming of the drop of the other shoe…
And a multitude or sellers didst use basic free accounts and would not upgrade; and they didst also eschew Credit-card payments. And they didst dwell freely in the Land of Paypal.
And so it was that the Lords of eBay cast their baleful gaze upon the void. And they saw a multitude selling their wares and accepting Paypal, but denying the Lords of eBay the offerings they craved.
And they were sorely vexed. "Fie upon the freeloaders", they said one unto another "They live freely in the land that we possess and yet they pay no tribute to us. This cannot be!"
And they changed the rules. And some didst upgrade, but yet many didst leave for other pastures. And things got worse.
Most reputable sellers will take Paypal, and that is the preferred way to pay for stuff on eBay. This is partly because it's quick, easy and
free for the buyer, but mostly because Paypal is now owned by eBay.
What is Paypal?
Perhaps the greatest confusion regarding Paypal stems from a basic misunderstanding of who Paypal are and what they do.
Paypal is not a bank!
Repeat the above line five times to get it firmly into your head. Got it? Great - on we go. Money in your Paypal account is not covered by any kind of bank account protection. I dare say that Paypal does not want to be a bank; why should they? The cost of compliance with banking rules and regulations would be horribly prohibitive, and I suspect that it would also place them under rather more oversight than they would like.
So what is it?
Paypal is most accurately described as an online payments
facilitator (try saying that five times quickly). They simply transfer funds from your account to someone else's... after a brief sojourn in their interest-bearing account.
Paypal Problems
Some sellers refuse to take Paypal. In most cases, this is because they have been burned in the past - sometimes by scammers, but
more often by Paypal themselves. In certain circumstances,
Paypal can freeze a seller's bank account for up to six months. Ostensibly an anti-fraud measure, many have had their accounts frozen in less-than-clear circumstances, which is enough to leave a bad taste in your mouth. It appears to me that Paypal can do whatever they want… but that is what you signed up for when you read, understood and agree to Paypal's Terms and Conditions (you did read them, didn't you?).
Paypal's penchant for freezing their customers' bank accounts actually sparked a class-action lawsuit that resulted in a settlement. The sweetest irony was that one of the conditions of the settlement was that Paypal e-mail all of their members to advise them of the settlement. When confused users e-mailed Paypal to ask them if this was a spoof,
they were told that it
was.
A lot of water has passed under the bridge since then, and one hopes that Paypal has grown up and wised up. However, it is prudent to remember that
Paypal is not a bank (say it five times more for good measure).
Moral: if you are going to Accept Paypal, and have it linked to a Bank account, make sure that you can live without access to that account for six months.
Epilogue: Why I no longer accept Paypal
When I started writing this part of the guide, it was in praise of Paypal. I accepted Paypal and recommended it as the fastest and easiest form of payment. This is no longer true.
There are two ways Paypal makes money. One is by charging sellers to accept Credit-Card-Funded transactions, the other is by charging monthly fees for "Merchant accounts". Both of these collect from the seller - Paypal is almost always free to the buyer.
It was also free to the seller, as long as you had a "Personal" (free) account and did not accept credit-card funded payments. Like many small sellers, I could not justify extra Paypal fees, and refused to pay a monthly charge for a "merchant account", so I fell into this category.
I always stated my terms clearly on my listings, and yet too many sellers blithely attempted to pay me using a CC, which I refused.
It was only a matter of time before eBay noticed this and started trying to wring a little more money out of the small sellers, and on
August 19th 2005, the other shoe finally dropped. eBay changed their rules for sellers concerning
Paypal. The official reason for this change was to "ensure a consistent user experience", but the only inconsistency that I encountered was that too many buyers would bid without reading my terms.
If you advertised that you accepted Paypal, you had to accept all forms of payment, including Credit-Card-funded ones. You also had to commit to upgrading to a "merchant" (i.e., paid) account. Some went along with it, but as a matter of principal, I refused.
As a result, I no longer accept Paypal on my listings, and I take pains to explain why.
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