Why Paypal Freezes Or Limits Accounts And How To Prevent This From Happening To You

Share On Facebook

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.

Why Paypal Freezes Or Limits Accounts And How To Prevent This From Happening To You

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.

Ready To Get Serious About Starting An Online Business?


If you are really considering starting your own online business, then you have to check out my free mini course on How To Create A Niche Online Store In 5 Easy Steps.

In this 6 day mini course, I reveal the steps that my wife and I took to earn 100 thousand dollars in the span of just a year. Best of all, it's absolutely free!

Give Me Access To The Free Course!
Enter Your Email Address:
Share On Facebook

Similar Posts

Have you read these?

80 thoughts on “Why Paypal Freezes Or Limits Accounts And How To Prevent This From Happening To You”

  1. Melissa Halim says:

    The truth is,
    if your account is limited/frozen for whatever valid/non-valid reasons,
    it is as good as gone, as you won’t have the mental strength and power and perseverance to face Paypal’s series of hurdles to get your money back.

    They have the power of a bank but none of the responsibilites.
    They are their own judge, and jury, and litigator.

  2. Ben says:

    There is an argument that PayPal enjoys limiting accounts so that they can use your money to re-invest within the 180 day period.

    1. Chimonger says:

      Hi Ben,
      It’s my understanding that Paypal is NOT a “bank”, yet most think they are.
      Which means, as I understand it, they are NOT bound by banking laws.
      ===What you are talking about is called “Skimming Float Interest”.
      ALL banking institutes have always done that, but only overnight; your money is always guaranteed to be there when you require it.
      Paypal, OTH, does things which have every appearance of the following:
      —1. Slowing transactions, they retain control of the money in “Float”, meaning: the longer they delay any transactions, the more money they harvest off of each transaction. Ethical? Nope. Legal? Dunno–probably highly unethical at least.
      —2. Freezing customer accounts Paypal operates:
      All money in those accounts, is under their control; meaning, as long as it’s frozen, Paypal gets to reap Float interest.
      —3. Demanding a link to customer’s other bank account, favoring that over a linked credit card.
      They can rotate money out of/into any linked bank account;
      NOT regulated by banking industry laws, not entirely.
      By rotating money out of the actual bank account, Paypal takes Float interest the actual bank would otherwise have gotten. Customers may not even know it’s being done.
      Paypal operates world-wide.
      —4. Paypal CANNOT force a “cash advance” from a credit card, though, in order to grab Float interest; that is likely why they more frequently demand a link to customer’s bank accounts instead.
      Also, Once Paypal has frozen a linked Credit card, that card is blocked everywhere Paypal operates accounting for any business; only way to get control of your linked credit card, is to Close your Paypal account it’s linked to, because their system refuses to allow it to be changed or Unlinked–I tried…it stayed blocked until I closed the Paypal account.
      Paypal coerces people into gifting them bank account links, and their personal ID copies, too….not safe.
      Anyone who calls customer assistance, never knows what country the customer service agent is–could be Pakistan, India, Ireland, etc. Not necessarily a bad thing, EXCEPT that there is no real guarantee of security, and every CSR contacted [about 8 of them in one night] gave Different reasons for Paypal freezing my Card and my Paypal account. Poor accountability and flip and coercive responses.
      Customers who ask to be hooked up with an agent in the USA, get told, as I did, “You have to keep calling back, and take your chances that a USA agent will answer the call” [which is supposed to be illegal–it’s supposedly a law that if a customer needs to speak with an agent in the USA, whoever took the call is supposed to transfer the person to one].
      Hope that helps.

  3. Leigh says:

    I used PayPal successfully for several years and sold a LOT of merchandise on eBay. I sold motorcycle apparel like leather jackets and motorcycle helmets.

    I changed absolutely nothing about what I was selling. Suddenly one day they froze my PayPal account stating that I was selling “suspicious” items. I called them and talked to multiple different reps, all rude and condescending and never actually answering my questions. They kept my money frozen in my account for the full 180 days and I then canceled my PayPal account when I finally got my money out.

    This is the thing. I was not selling anything “suspicious”. I was selling the exact same leather jackets and motorcycle helmets I had been selling for years. I changed nothing about my business model and they totally screwed me. I was a great ebay and paypal customer, they both made a LOT of money from me, and with no good reason, they ruined my business on ebay. Once we could not offer PayPal as a method of payment, we could not sell on ebay.

    You have been very blessed not to have had any issues with them. I have always had my own merchant account that I have used for my own websites, and only ever used PayPal due to they force you to if selling on ebay.

    I don’t know if they have changed as I’ve not used them in about 6 years since they royally screwed me over.

    1. Barry says:

      Thank you for sharing Leigh. Totally know what you mean about rude and condescending and never actually answering questions. I stop selling on eBay but have to buy from there sometimes and now they have limited my account, not sure why so I can’t buy from eBay either. Wish someone would start an alternative.

  4. Any good recommendation for merchant account for seller?

  5. Paula R says:

    I just now got a notification that my paypal account was closed do to policy What the heck I have shopped on line and what is going on!!!

  6. Hi,

    Too bad this didn’t happen a year or two ago. Pay Pal once again has settled a HUGE law suit for whenever they freeze people’s money.

    Look it up & maybe contact the law firm who’s handing the class action.

    I hope you get your money back.

    Michelle
    http://www.rapidfinancialsolutions.com

  7. John Walls says:

    I would advise anyone with a Business to stay away from Paypal. Theres too much of a risk involved with them having complete control of your money. Would you really turn over all of your money and lifesavings to a complete stranger who offers you no guarantees about how they handle your money? Keep in mind thats what you are literally doing everytime you use them. They are not regulated by the government and they don’t have to play by the rules.

    I had been with them for over 10 years as well and I sold a few items here and there. But I used my account for mostly buying on ebay. I had an incident where I became the victim of identity theft and fraud. Someone hacked into my account and used my account to purchase items. As a result of this Paypal froze my account. So while you may have been lucky thus far with not having any issues with having to deal with a limited account. I would keep an eye on my account. Recognize that things could change in the blink of an eye even if your account is ever compromised through no fault of your own. I just personally dont think its a risk worth taking.

  8. Thomas Haggerty says:

    I have used PayPal for several years without issue, yet this year was something different.

    Apparently PayPal had limited my account due to notification of buyers reporting that they are not getting their merchandise. Not a single buyer of mine had notified me nor open any type of dispute with either PayPal or eBay.

    So I contacted them and could not get a hold of anyone who can give me a clear answer. Not only that, they permanently restricted my access and holding my funds for 180 days! I am a business, I can’t wait that long to get access to that. It is so frustrating that PayPal doesn’t care no matter the years you have been with them. I have gotten nowhere with their support and am in need of getting back.

    I did start reading somewhere on Auction Essistance that stealth is alternative to get back on? Is this true? Would this be a good way to get back on or will eBay find out?

  9. Anonymous says:

    I was a former paypal employee. When it comes to placing holds and limitations on accounts, they look at several indicators. Firstly I would like to state calling paypal to inform them you are receiving a large payment means dick! The person’s in the fraud department are the ones responsible for the limitations/holds. As I was one of those agents prior to their decent and disloyalty to to their employees and their customers.

    So let’s say you received 10k, your account goes negative. Sadly based on PP’s rules that account is responsible for the funds. However with said they are not a bank and have no legal bounds to even make you pay that balance. So you can just open another account and bypass the balance.

    When it comes down to what we look at to determine whether payments or accounts are fraudulent is by looking at your SSN, IP’s, device ID’s, flash shared objects, Visitor ID’s, credit cards, bank accts, phone numbers, and addresses. We also use feedback from ebay, complaint history, sales history and if people are shipping the items being sold to determine whether or not fraud is happening on accts.

    It’s very easy to slip by PP’s security you just need to know what the people that work there are looking for. PP is a horrible company and they deserve to have their processes exsposed.

    I hope this helps
    Anonymous former employee.

  10. U Name It Used Restaurant Equipment says:

    Been with paypal for ten years, last month i had two big transactions from selling locally Used Restaurant Equipment. Fucking paypal put restrictions on my account. Luckily, I transferred some of the funds to my Chase back business account and left some at Paypal. I was shocked how they can do that, It was my mistake to open a paypal Merchant account. I had a chase Merchant account prior to that , and made lots of transactions without any problem, but these paypal ass wholes will never been trusted again. Please please if you want to ba safe, Don’t ever do paypal , They can luck up your money and make you homeless. I will close my acc ASAP

Leave a Reply

Your email address will not be published. Required fields are marked *