Let me begin by saying, overall, I have had a positive experience with Paypal- it is convenient, fast, and easy to use; customer service isn’t too difficult to get a hold of, and most of the representatives are very helpful. I have had two negative experiences however, and both were connected to the use of credit cards.

Using a Credit Card to Make a Paypal Purchase

When you make a payment through paypal, there are several places that the funds come from. If you have a balance in your Paypal account, that will automatically be used first. If you don’t want to use that, make sure that you transfer those funds to your bank account before making a payment. The next option automatically used by Paypal is to have the money transferred from your bank account via an instant transfer. If you want to use your credit card (on file with your paypal account) you have to jump through a couple extra hoops by clicking on “additional funding options”. Then you get the following message from Paypal:

FUNDING CONFIRMATION

No finance charges or bills to pay
This payment is covered up to $1000 with Paypal Buyer Protection
You are 100% protected against unauthorized payments sent through your paypal account
We keep your bank account details private
Do you still want to make this payment with a credit card?

The implication is that you shouldn’t use a credit card because you get so much protection from Paypal. Unfortunately, this is not always the case. Last month I used Paypal to make an eBay purchase from a highly rated eBay seller through their eBay store. I made a Paypal payment using my credit card to make the purchase. The item came quickly and as described but it turned out that I needed a different model of the item. The seller said I could return the item and then reorder the next size and apply the refund to the cost. This time I used my Paypal balance to pay the difference in cost. Because of the size difference, the item had to be special ordered and I was told it would be 3 weeks before it would be shipped. During those 3 weeks something must have happened to the seller because they stopped communicating and suddenly they were getting a lot of negative feedback from buyers not receiving their purchases. My item never arrived and I never got any response from the seller. Fortunately, I did have all my paperwork showing my original purchase, the receipt of the return by the seller, their email instructing me about the replacement item, etc. I contacted Paypal with all of this information and was informed that because it was 45 days past the transaction, they couldn’t refund any of my money despite the fact that the seller was in the red. I contacted my credit card company regarding the original purchase and after providing them with the identical information, I was refunded the payment that I made through Paypal using the credit card. Unfortunately, the payment that I made using my Paypal balance was completely lost. From then on I have ALWAYS used the credit card option to make a Paypal purchase. I feel this is the only way that I am truly protected. I suggest you do the same. Your credit card company give you the utmost protection on your purchases even months down the line. Of course not all sellers accept credit card payments.

Accepting Credit Card Payments Through Paypal

In order to accept credit card payments through Paypal, you must have an upgraded paypal account. People buying your items can then use their credit cards through Paypal. Many buyers prefer this and it can even attract them to your listings. However, once you have an upgraded Paypal account you are charged a percentage on EVERY Paypal payment you receive. It does not matter whether the person who pays you is using their Paypal balance, their credit card or their bank account- the same percentage is deducted off of every payment you receive. This even includes payments from your grandmother who is just sending you money for your birthday.

Over a four months ago I sold an item on e-bay. The buyer received the item and was very happy with it; the buyer left positive feedback and went on to win a couple more of my auctions during the month after. They even contacted me for assistance with another eBay matter at a later point. Then, 94 days after the original auction, the buyer contacted me to say that the item purchased from me was “significantly not as described” and demanded a full refund. Needless to say I was confused and surprised. I contacted the buyer to find out more about the problem and received very nasty responses. I looked at the person’s buying history and noticed that since they bought the item from me, they had gone on to buy 2 similar items for a much lesser price. I concluded that they were suffering buyer’s remorse and looking for their money back. Because I was sure that the item was as described, I declined the return. Because the buyer could do nothing through eBay or Paypal (since it was more than 45 days since the purchase was made), the buyer filed a dispute through their credit card company (just as I did above). The credit card contacted Paypal who then contacted me. The first thing Paypal needed to do was decide whether or not to back my case. I followed all of the required steps including a 15 page documentation verifying the authenticity of the item in dispute. Paypal then notified me that they would be disputing on my behalf as they could not find error on my part. I spoke with several different Paypal representatives during this time. Each one informed me that I should not have to refund the purchase. I was VERY disappointed weeks later when I was informed by Paypal that the buyer’s credit card company determined that I had to make the refund. The buyer had returned the item directly to Paypal and on top of everything else, I had to pay Paypal to ship the item back to me and pay a dispute resolution fee. When I called to question the outcome I was told “this is a cost of doing business. In most cases the credit card company will get the money back as long as the buyer has returned the item. There isn’t much we can do about it, even if you are in the right as it appeared you were in this case.” The credit card company will get the money from Paypal no matter what as they will always side with the buyer.