A few months ago, I posted an article about Paypal Website Payments Pro Vs Authorize.Net where I provided a detailed comparison of two different credit card processing solutions. And almost immediately after posting it, I started receiving an abnormally large amount of email feedback from Paypal haters. In fact, I’ve never encountered such strong anti-feelings for any service before.
Having used both services in the past with no problems whatsoever, I was very surprised to hear the overwhelming negative feedback towards Paypal.
I will never use Paypal again. After being a loyal customer for over 3 years, one day they decided to place a 6 month hold on my money for no reason. I couldn’t access over 20k in my account which I needed to pay my bills!
The above quote was just one of many emails I received in the past few months since my article went live. In the interest of full disclosure, I use Paypal Website Payments Pro to accept payments for my online store and I’ve never had any problems with them in 4+ years. But the fact that so many readers have such strong anti-Paypal sentiments made me a little paranoid about my business. After all if you can’t process credit cards, you can’t make any money.
Paypal Horror Stories From People I Know
Most of the horror stories I’ve read about Paypal through surfing the web have to do with Paypal randomly limiting accounts or freezing funds. Most of the complaints I’ve come across seem to indicate that Paypal will rarely hold your funds for longer than 6 months, but 6 months can be a long time if you need access to your money. And once they freeze your funds, it doesn’t make sense to continue accepting money through Paypal if you can’t access it. In other words, once your account is frozen, you are pretty much screwed.
All of the stories that I’ve read online are from people that I don’t know personally or from people that I’ve never heard of before so I’ve been taking them with a grain salt. However, I do have a few fellow blogging friends that have had their accounts frozen for no reason so I asked them for their side of the story.
In both cases with my blogging buddies, they had their accounts frozen after a big product launch. For one of them, Paypal limited their account by only allowing them to process $10,000 per day. The other blogger had over 40K in funds frozen for 180 days. It seems as though Paypal doesn’t like seeing huge spikes in money being received into your account.
In the case of my online store, the revenue we receive is pretty steady and consistent from month to month but occasionally we get spikes of revenue when we hold a sale. So, I decided to call my dedicated account manager at Paypal to get the story straight and here’s what I found out.
Why Paypal May Limit Or Freeze Your Account
After talking to my Paypal rep for over 30 minutes, they reassured me that it’s extremely rare that they ever place holds on user accounts. They also told me that there were no limits on my account whatsoever and that I could process as much money as I wanted to in any given day. When I brought up the stories about my blogging friends and how they had their accounts frozen, the representative assured me that the reasons for limiting an account vary greatly from user to user and largely depends on the situation.
Under the following circumstances, Paypal has certain triggers in place as a safeguard against fraud. Here are some reasons why some of these safeguards might be triggered
- You’ve received an abnormally large amount of money in your account that is way above your average
- Someone has filed a complaint to Paypal about your business
- A series of chargebacks have been placed against your account
- Your website has questionable content
- You are in violation of Paypal’s use policy. For example if you sell drugs or anything illegal, you may get banned
- Your account information is not up to date or your account is not fully verified
- Someone has logged into your Paypal account from a strange location.
- Your credit score is low or something with your background history makes you a higher risk customer
- They have detected fraudulent activity on your account.
Preventing Paypal From Ever Limiting Your Account
Towards the end of my conversation with Paypal, they assured me one last time that only a very small fraction of a percent of people get their accounts frozen and that accounts are rarely frozen for the full 180 days. They also recommended the following guidelines to greatly reduce the chances of this happening.
- If you are expecting to receive a large sum of money, then you should call Paypal ahead of time so they expect to see the extra funds. In other words, if you are planning a large product launch, make sure you let them know ahead of time
- When you first signup for Paypal Website Payments Pro, there’s a survey that you have to take. Make sure that you check off higher numbers in terms of how much money you anticipate making every month
- Contact Paypal to make sure that your account is not limited in any way in terms of how much money you can accept per day. Sometimes limits are placed depending on various factors relating to your credit history or background checks
- Make sure your name or the name of your business is on your Paypal account and that it exactly matches your bank account and credit cards.
- Use the exact same addresses and phone numbers that match your bank account and credit cards
- Always use trackable methods of shipping if you ship physical goods in case a dispute is filed against you
- Make sure that your FEIN or social security number exactly matches the name of your business on the account
- Link both a credit card and a bank account to Paypal
Does This Sound Like Too Much Trouble?
Here’s the bottom line how I see it. If you are in the business of selling informational or digital goods and your revenues are extremely lumpy, then I would go with a regular merchant account and gateway like Merchant Plus. If you have low credit scores or any history of fraud or criminal activity, then go with a regular merchant account and gateway like Merchant Plus. If you never want to deal with the possibility of getting your account frozen or limited, then go with a regular merchant account and gateway.
The main reason my wife and I use Paypal is because they offer an extremely convenient way to ship packages and accept Paypal payments with one easy to use interface. Paypal’s fees are higher than a traditional merchant account but the perks are worth it for our store. But if you do decide to go with Paypal, it’s probably a good idea to give them a call to make sure that there aren’t any artificial limits on your account.
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