I’m using this page to record some of my personal experiences with PayPal.
Until 2015, I’ve had no issues with PayPal: the service worked exactly as advertised. At PayPal’s suggestion, I connected it to a bank account so that PayPal could save on the fees associated with processing card transactions. Subsequently, I arranged for some people to pay me back through PayPal, and as a result I accumulated a reasonably large PayPal balance, which means that I was able to make payments through PayPal without it touching my bank account. Looks good!
However, in December 2015, I hit a number of issues with PayPal’s security systems. Specifically:
- In preparation of trying to use PayPal to make a large payment (in excess of $1,000 but less than $10,000) I attempted to transfer money from my linked bank account (that had sufficient funds) to PayPal. The attempt was blocked, and calling PayPal and asking the customer support to manually unset a flag did not work.
- I later was unable to make transfers of money for sums as small as $1 to recipients to whom I had recently transferred money, despite the money being in my balance and even after customer support manually toggled the flag.
All of these problems occurred despite my having sufficient funds and my account not being blocked in any manner whatsoever: the blocking was happening at the transaction level. Here’s what I gleaned after spending a lot of time talking to (and even more time waiting on the line for) customer support:
- PayPal customer support phone lines can require fairly long waits. The friendly robot that initially answers one’s questions is not very smart (not her fault!) and the track that is played while I was waiting on the line is very repetitive, telling me basic things like how to reset my password and how to use communications to resolve disputes.
- While some transaction-blocks can be overridden by customer support, many cannot. In these cases, practically nothing can be done.
- Customer support either does not know or will not reveal clear guidelines on how to structure or schedule payments to avoid hitting PayPal’s security flags. It may be that the system uses some complicated anomaly detection algorithm that nobody can articulate; it may also be that they don’t want to reveal it to avoid hackers misusing the information.
- PayPal offers the “Send money to friends and family” only as a “courtesy” feature and therefore does not expect the use of this feature to transfer large sums of money. Thus, despite there not being any specific restrictions on how much money can be transferred, in practice the system is designed to block payments as soon as it senses that you are trying to actually use it with nontrivial frequency. All my problems have been with this feature. Note that PayPal makes no transaction fees from this feature, so we can think of the trouble with it as almost a feature from PayPal’s viewpoint, insofar as it encourages people to use the Merchant Services option to send money.
In short, if you want to send anything more than a hundred dollars to a friend or family member, PayPal is simply not a reliable option. It is better to use one of these: (a) paper check, if it is not urgent, (b) wire transfer, (c) electronic funds transfer. In practice, in the couple of cases that occurred in 2015, I decided to go for the paper check route.
See also my page on large payments.