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PayPal: Good For Buyers, Sellers Beware

May 7, 2005
Review by  
Rated a Very Helpful Review
  • User Rating: Very Good

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Pros:Allows for fast, easy payments. Buyer protection can be very useful.

Cons:Sellers can have alot of problems and fees are a bit high.

The Bottom Line: PayPal is great for buyers but can be a big headache for sellers. Not good for selling high-priced items.

In my ever ongoing search for a good online payment system, PayPal was the largest and most popular of the systems out there. I first signed up back in February of 2003 when I opened up my eBay store to sell items from various dropshippers as another income. PayPal seemed so easy to use and it made payment so fast that I thought this is the thing I've been looking for. Finding out about PayPal was also very easy being an eBay seller because eBay now owns PayPal.

On eBay, PayPal is the number one preferred method of payment so it seems. Everywhere you go on eBay, you see sellers offering PayPal as their preferred payment source because PayPal has a resolution and protection center that no other payment site that I've seen has to offer. Also, PayPal is not just for eBay. It can be used to pay for various subscriptions, payment on various websites and much more.

What Exactly Is PayPal?

For those of you that don't know exactly what PayPal does, this is for you. PayPal is an online payment system that allows for you to pay for purchases in four ways: credit card, through your bank account, from your PayPal balance (useful if your an eBay seller or sell other items on the net and accept PayPal as a payment method) and by PayPal credit. This system allows for a quicker transaction and the ability to receive your purchase at a much faster rate.

In order to accept credit/debit card payments through PayPal, you must have a Business or Premier Account. The Business Account is the same as a Premier only with the added ability to have multi-user access to the PayPal account.

If you do decide to pay through PayPal and using the money in your bank account to do so, it can sometimes take up to four days for the transaction to be completed. This can be very frustrating when you are in a hurry to receive the item you purchased.

This service does make payment alot easier but there are alot of downfalls as well as you will see in this review. As with any online payment system, it is always better that you research exactly what they are and what other people's experiences are with that particular company.

PayPal Fees
PayPal is free to use for all buyers but when it comes to selling and using PayPal there are fees.

Here are the fees for accepting payments through PayPal:

$0.01 USD-$3,000.00 USD costs you 2.9% $0.30 USD
$3,000.01 USD-$10,000.00 USD costs you 2.5% $0.30 USD
$10,000.01 USD-$100,000.00 USD costs you 2.2% $0.30 USD
over $100,000.00 USD costs you 1.9% $0.30 USD

The percentage you are charged for the higher payments accepted does go down from a lower payment, but trust me, if you accept a payment of over $3,000, PayPal gets a very nice sized piece of that. I accepted a payment of almost $6,000 one time for a car I sold and PayPal walked away with with over $150 of my money. If you accept anything over $1,000 you're better off having the person send you a money order or do a bank transfer to save you the money.

How PayPal Works

PayPal is very easy to use for a buyer or seller at any level. When using PayPal with eBay, it is as simple as clicking on the Pay Now button on the auction page that you purchased the item from. That will then take you directly to PayPal’s website where you just have to fill in the correct information, i.e. name, shipping address, shipping costs in some cases, and then click the “Pay” button and the money is instantly on its way.

When using PayPal with other website’s purchases there is more information to fill out most of the time, i.e. payment amount, purchasing website, shipping costs and a few other basic things, but all in all it is very easy to use.

PayPal also offers a nice assortment of Merchant Tools that allows to accept payments through them from your website/eBusiness that you own. This is very helpful if you want to accept credit card payments on your website but don’t want to sign up with one of those high priced credit companies to do so. PayPal Merchant Tools gives you a Shopping Cart, Buy Now Buttons, Subscriptions and Recurring Payments ability, Donations ability, Custom Payment Pages, Invoices, Payment Notification via email, and Reporting Tools that allow you to see exactly how much money you have collected via your website.

And there are also a few Auction Tools at your disposal for eBay and other auction sites through PayPal. Auto Logo Insertion allows for the PayPal logo to be inserted automatically into all of your auction pages so that your buyers know that you accept PayPal as a payment option. An End Of Auction Email allows for an email to be sent automatically to a buyer as soon as the auction item has been bought and is able to be customized with your own words to let your buyer know everything they need to know. The Auction tools also allow you to have reports of all transactions through PayPal from your auctions as well.

The main problem I have has with PayPal is their Buyer/Seller Protection Programs. If you buy or someone buys an item and it isn’t what was stated in the auction or the item is received at all the PayPal protection Program can be a nice option. This allows for you or another buyer to dispute the transaction through PayPal so that a refund may be issued. Unfortunately there are a lot of not so honest people on the internet so this program can be very useful but at the same time it can become a very big problem. On at least four occasions I have sold items through eBay where the buyer has payed for the item through PayPal and after receiving the item the buyer has filed a claim with PayPal saying either the item wasn’t received or that the item was not as described in the auction. When a claim is filed, PayPal gives the seller three options: Authorize the Refund, Submit Proof that the buyer has already been refunded or Provide A Tracking Number for the item. There is nowhere on PayPal’s Dispute Resolution pages that allows for the seller to speak his/her own words about the claim. Everything that I have sold on eBay has been brand new, in the packaging so I knew that wasn’t an issue and the description for the item was basically the same description as the manufacturer’s but just reworded a little. Unfortunately there are people that a dishonest enough that they want to have the item but yet get their money back as well. In all the instances the buyer was refunded because of the inability of contact PayPal in any way by email or phone. Here are various website, such as, that show other user’s plight with PayPal and how they have gotten ripped off as well but PayPal doesn’t seem to care too much about the dispute resolution process.

Website Layout

PayPal’s website is very user friendly and easy to use. Everything that is needed is supplied in tabs and subtabs on the top of each page that allows for quick access to all areas of the website. Each page has a very nice layout without being crammed together which is very easy on the eyes.

PayPal Features

PayPal offers some nice features for use to its users. One of these is BillPay which allows for you to use your PayPal account to pay for various bills. Here in my area I am able to pay for Verizon phone service, Pennsylvania Power and Light and Sprint Long Distance service. The companies that you are able to pay with this feature varies depending on your location.

PayPal also has a Merchant Referral Program that allows you to make money referring merchants to PayPal. When one of your referrals sign up to PayPal, you immediately start earning 0.5% of the new merchant’s revenue. This is limited to the first 12 months of your referral’s time using PayPal and your can earn up to $1,000 through each merchant you refer. This also can only be used for non-eBay transactions by the merchant you refer.

Newer PayPal Features

PayPal has just recently incorporated the ability to earn interest on the balance in your PayPal account. The current interest rate on this at the time of this review is 2.90% annually. The way this works is that you invest in the PayPal Money Market Fund. There is no limit as to how much or how little you use to invest in this service but please note that you are able to lose money in this just like in investing in stocks from a company. This can come in very handy for someone that has a lot of transactions through eBay or their website and constantly has a decent amount of money sitting in their PayPal account. Given that for most users it doesn’t add up to much at all but it is a nice added feature.

Another nice new feature is the addition of the PayPal ATM/Debit Card. This allows for the option of withdrawing money directly from your PayPal account from your local ATM, other onlie stores that don’t accept PayPal or even in one of your local stores. The only drawback is the fact that you are charged a fee for withdrawing fund at an ATM machine with this card that depends on what bank’s ATM you use. This fee can range anywhere from $.50 up to $2.00 in some locations.

And the final newer feature of PayPal is the PayPal Buyer Credit. This acts just like a credit card but there is a huge drawback: the annual percentage rate. With PayPal Buyer Credit you pay 21.25% APR which is just ridiculous. If you decide you need a credit card to pay for an item you're just much better off applying to get a Mastercard or Visa to make purchases with and get a much lower APR. This is one aspect of PayPal I will never use.

Final Thoughts

PayPal is a very handy tool to use for online and other payments but there are some drawbacks. I do still use PayPal on auction that I have that sell for less than $40 but I refuse to use it for anything more. Improvements are constantly being added to PayPal to make it more appealing and I hope that their Dispute Resolution department is going to be one of those improvements very soon. With the large amount of dishonest people that use these services there will always be the need to be careful when doing transactions over the internet. While I have used many, many online payment services in the past years and have had bad experiences with almost all of them, PayPal is one of the better ones all in all. I don’t think there will ever be a way to totally eliminate the scams and problems that occur in these services but there is still a lot that can be done to help them to not happen. Until then I’m still going to keep selling online but I’ll just keep it to money orders for the higher priced items but still use PayPal for the lower priced ones where taking a loss won’t be such a big deal.

With my recommendation, I would recommend PayPal to someone to use for buying purposes but when it comes to using it for selling there is alot left to be desired.

I hope this review gave you some insight into PayPal and their many offerings and the things to watch out for while using online payments systems.


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