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This story tells of my first PayPal experience. On 07-11-05, I received an email notification from PayPal, advising that $1,325.00 was awaiting acceptance by me from the buyer for my car. In trying to accept the funds, I was advised that my Personal PayPal account had a $500.00 monthly limitation for receipt of funds. In order to accept this payment, I had to upgrade to a Premier account, which in, and of itself, was free. I did so, which automatically accepted the full $1,325.00 payment. No choice for payment acceptance was given once I requested, and was approved, for the PayPal account upgrade from Personal to Premier.
In addition, an amount of $38.73 was immediately deducted from the $1,325.00 payment made to me, reducing this payment to $1,286.27. The $38.73 represented the PayPal “Premiere Account” payment acceptance transaction fee of 2.9% + $0.30, which is basically their charge for accepting the money and making it available to me in my PayPal account. As a side note, PayPal does not easily disclose the upper 2.9% of their fee scale for accepting money under Premier or Business Accounts. Most all info. says “as low as 1.9%” PERIOD. I have included the full fee schedule provided by PayPal at the bottom of this narrative.
As the money was now in my PayPal account, I wanted to get it out of that account, and into my personal checking account as soon as possible. I read reports from PayPal customers on line, stating that it was very difficult getting money out of your PayPal account, as they delay, delay, delay. This was the reason I didn’t want to use PayPal in the first place.
FYI, as is the case of a Personal PayPal Account, all transactions I believe are free of charge. The only money I imagine they make on these types of accounts, is the interest income on the “float”, (your money they have control over until it is released to sellers outside of PayPal for purchases you have made, or until it is returned to you). Even in the case of your money being released to sellers for purchases you have made, typically the seller will retain the money from your purchase, and use it as operating funds within their PayPal account. In these cases, you can see PayPal still has use of your original money, (“float”), long after it is paid to sellers, and up until such time a seller receives an actual payment from PayPal, outside of the sellers PayPal account. Your original PayPal money just keeps rolling over and compounding interest from seller to seller . . . . . kind of like the Energizer Bunny. . . . . PRETTY SMART WAY OF DOING BUSINESS! In extremely simplistic terms, here is an example of what I refer to as “float”:
Ann makes $175.00 purchase from Ron using PayPal.
Ron’s PayPal Acct Balance $175.00
Ann’s PayPal Acct Balance $ 0.00
Balance Forward $175.00
Ron makes $125.00 purchase from Tim using PayPal.
Tim’s PayPal Acct Balance $125.00
Ron’s PayPal Acct Balance $ 50.00
Balance Forward $175.00
Tim makes $115.00 purchase from Ben using PayPal.
Ben’s PayPal Acct Balance $115.00 Tim’s PayPal Acct Balance $ 10.00
Ron’s PayPal Acct Balance $ 50.00
Balance Forward $175.00
Ben makes $ 75.00 purchase from Dan using PayPal.
Dan’s PayPal Acct Balance $ 75.00
Ben’s PayPal Acct Balance $ 40.00
Tim’s PayPal Acct Balance $ 10.00
Ron’s PayPal Acct Balance $ 50.00
Balance Forward $175.00
As you can see, Ann’s original $175.00 never leaves PayPal during this process of numerous separate transactions. PayPal has use of these funds, providing them with “float” capital collecting compounded interest, (interest that is periodically added to a principal sum, resulting in a new principal balance, which then triggers a new interest assessment), all along the way, up until such time that a portion of, or the entire $175.00 is withdrawn from PayPal, transaction of which adds on another 3-4 day processing time, thus providing for further “float” on that money. Now, take this by millions and millions of dollars.
Maybe this is why PayPal is supposedly hard pressed to release customer funds to their customers. Makes sense to me!
Due to my refund concerns, I immediately proceeded to withdraw funds from my PayPal account, and requested that these funds be transferred into my personal checking account. I was advised that the transaction had been accepted and was pending, and that it would take 3-4 business days before the funds showed up in my personal checking account.
All fine and good, except that:
I immediately started thinking about “credit card payments”, which was the method I believed the buyer of my car took in paying my PayPal account, and began thinking about the variety of methods available for a buyer to dispute a charge. I have personally disputed credit card payments in the past, such as when a charge appeared on my bill evidencing a fictitious, unauthorized on-line purchase. In the instances I did this, I was credited the full amount immediately, and was told by the credit card company that they would resolve the issue with the vendor. Nothing more was ever heard back on any one of these disputes.
I could just see where my vehicle sale could potentially end-up, if the buyer wanted to make my life miserable. Let me provide a possible scenario:
“I have an out-of-state buyer who purchased my vehicle “as is” – “sight unseen”. The cost to transport my vehicle by an auto transport company from CA to the state where the buyer resides, is a minimum of $400.00, for uncovered (trailer) transport, and could go all the way up to $900.00 for covered transport. I already reduced the purchase price of the vehicle by $200.00, to help defray the vehicle transport costs. Now, let’s assume the vehicle has been transported, and is now in the buyers possession, out of state. The buyer decides that the vehicle is not really what he wanted, and wasn’t what he pictured, even though he had almost 30 pictures of the vehicle within my on-line ad. As a result of his dissatisfaction, he disputes the purchase with his credit card company, who in turn, comes back to PayPal with a “chargeback”. PayPal in turn, wants the money back that I already transferred into my checking account. In order to get their money, I believe they can debit the funds out of my personal checking account, in the same fashion they would for any PayPal purchase I make.
So, due to my concern, I phoned Pay-Pay on 07-12-05, after spending the preceding night, up until wee hours of this morning, reading through PayPal’s “help” pages. The following information was confirmed by Michelle in Customer Service, Tammy in Dispute Resolution, and Brenda (my second call to Dispute Resolution), and only after they discussed my apparent “unique” situation with each of their respective supervisors:
1) My request to transfer the buyer’s payment to my checking account on 07-11-05, takes 3-4 business days to complete.
2) Pending this money transfer request, my PayPal balance has dropped to zero, as no money existed in my account prior to the buyer’s payment.
3) Personal Accounts are limited to receiving $500.00 in any one month period, which is why I needed to upgrade my account to a Premiere Account. In upgrading, it automatically accepted the buyer’s $1,325.00 payment.
4) When funds are received in a Premiere Account, the seller, or person receiving the funds, has no idea how that payment was made to PayPal by the Buyer. It could be credit card, debit card, check, cash, etc. It was only because I had to upgrade to a Premiere Account to accept the buyer’s payment, that it was a pretty good assumption on my part that the buyer’s payment was made by a credit card. At any other time, this information would not be available to me.
6) I have two ways of refunding the money to the buyer, one of which I want to do, and the other stay away from:
-I DO NOT want to “SEND MONEY” to the buyer from my PayPal account.
-I DO want to “REFUND” the buyer’s payment from my PayPal account.
The reason is:
-If I use “SEND MONEY”, I will be charged another $38.73 to send the money, on top of the $38.73 originally charged as a fee to accept the money.
-If I use “REFUND”, the full transaction fee of $38.73, with the $1,286.27, will be returned to the buyer, for a total refund of $1,325.00. This has to be done within a 60 day period, or you loose refunding of the fee, and are charged another fee of $38.73 by PayPal for processing the refund.
7) For either of my two “REFUND MONEY” options, I have to wait for the original money transfer I requested from PayPal, to hit my bank account, as I do not maintain enough funds in this bank account to cover the refund.
Now, I have two ways to time the Refund:
8) Option #1: Once money hits my personal checking account from PayPal, request “REFUND MONEY” to the buyer for this purchase. My PayPal account balance will be zero. PayPal will withdraw funds from my checking account and issue an “E-CHECK” to the buyer’s credit card company, or to him if I am wrong in assuming that he paid by credit card.
-THE TRANSACTION TAKES 3-4 BUSINESS DAYS.
-THE BUYER IS NOTIFIED THAT A RETURN PAYMENT IS IN PROCESS WHEN I MAKE THIS
REQUEST, AND THAT IT
WILL BE 3-4 BUSINESS DAYS BEFORE FUNDS ARE RECEIVED.
9) Option #2: Once money hits my bank account from PayPal, request “ADD FUNDS” from PayPal to transfer the full amount of $1,325.00 to my personal checking account. Once my PayPal account is credited, request a “REFUND MONEY” for the full amount to the buyer, which is immediately provided to the buyer.
-THE MONEY TRANSFER FROM MY CHECKING ACCOUNT TO MY PAY-PAL ACCOUNT TAKES 3-4 BUSINESS DAYS.
-THE BUYER IS NOT AWARE OR NOTIFIED THAT A RETURN PAYMENT IS IN PROCESS. THE BUYER BECOMES AWARE
AT THE TIME I REQUEST THE “REFUND MONEY” FROM PAYPAL, ONCE THE FUNDS ARE IN MY PAYPAL ACCOUNT.
Either way, there is a 3-4 day wait. It’s just a matter of how quickly I want the buyer to become aware of the refund. The amount of time it takes to get that refund to the buyer is the same under either option.
-Under #8 above, the buyer knows about the pending refund immediately, and that he has to wait 3-4 business days for receipt of funds.
-Under #9 above, the buyer would not know about the pending refund during the 3-4 day wait, during which time the money is being transferred from my personal checking account to my PayPal account. later than #8 above.
10) On a final note, you are not protected by PayPal against buyer credit card charge backs, unless you are covered by the Seller Protection Plan, (SPP), and even then, it’s not really protection against charge backs. It’s protection against, as I quote from PayPal’s Website:
Once something goes into a credit card charge back, the buyer is represented by their credit card company, and the seller, (me), is represented by PayPal. The seller and buyer are essentially kept out of the process, with the exception of providing evidence of good faith, etc., only if such evidence is provided within the time limit allowed, (in some cases, three days from PayPal’s notification to the seller). This is a scary thought. More on SPP below.
I phoned PayPal back and spoke with Brenda in Account Resolution. We determined:
11) Regardless, this transaction is not covered by the SPP, because of either (1) the buyer checked a box which evidenced an “other” product category, or (2) the funds came into my PayPal PERSONAL Account, and in order to receive funds over $500.00, I had to upgrade to a Premiere Account, WHICH IS ELIGIBLE FOR SPP, however, the account WAS NOT A PREMIERE ACCOUNT WHEN THE FUNDS HIT MY PAYPAL PERSONAL ACCOUNT.
I expressed that, if (1) above was the case, then this is not a seller benefit, rather a buyer dictated benefit, and if (2) above was the case, that is totally unfair, as the account was in fact upgraded to a Premiere account for FUND ACCEPTANCE, and even though the account was a “Personal Account” at the time I was notified by email that funds had been sent, I had no way of accepting or getting to these funds without upgrading because of the $500.00 receipt limit, and the PayPal rule of “no credit card acceptance” under Personal Accounts.
I asked Brenda to check with a supervisor to see if it was (1) or (2) or both above, which caused me not to have the SPP protection included on this transaction, and if it was (2) above, if the SPP could be applied to this transaction in view of the situation.
She placed me on hold and did so. Brenda advised that the cause for no SPP was due to (2) above, not (1), and no, they can’t make the transaction eligible for SPP after the fact. The only way to do this would be to refund his money, and have him make another payment to my PayPal “PREMIER” account.
As an aside, I could also revert back to a “PERSONAL” account, and accept three payments from the buyer over a three month period. Not in the cards. Also, once you upgrade from Personal to Premiere, revert back to Personal, go back to Premiere again, you are then a PREMIERE account for life with PayPal. I understand you may however, have one of each, only by linking totally separate bank accounts.
12) Getting back to the SPP, according to Brenda, the $5,000.00 SPP annual limit is designed to cover against fraudulent credit card or other fraudulent money transactions, not really charge backs. It’s interesting that PayPal’s disclosure statement is quite vague regarding exactly how the SPP $5,000.00 annual protection can be used. So, as far as I’m concerned, and regardless of the actual applicability, the SPP is useless to me in this particular situation. Below is information directly from PayPal’s website regarding the SPP.
So, once all of this is ironed out, I will revert back to my original payment conditions for purchase of the vehicle:
- Cashier’s Check or Money Order – Once received, funds will be deposited, at which time a waiting period of 14 days will be observed to be certain that the instrument is not fraudulent, and funds clear. After this period, buyer will be contacted to orchestrate vehicle transport with the commercial transport carrier, or
- Wire transfer funds from buyer’s account to my account. Upon verification of receipt, I will notify buyer that vehicle transport may be scheduled.
While PayPal is a convenience for most buyers, just remember that convenience can have it’s price.
Posted: April 20, 2012 at 8:46 am