How To Avoid PayPal Scams and Chargebacks
I don’t want to seem like I have a vendetta against PayPal, because in fact I think they’re a great payment processing system. However, they are not the infallible, completely secure option that some people seem to believe. If you don’t protect yourself while using PayPal, you can easily fall victim to scams and chargebacks that can cost you a lot of money.
Purchasing Through PayPal
One of the best ways to protect yourself when making a purchase with PayPal is to purchase via a credit card. Your PayPal account can be used to purchase items online with funds drawn from your PayPal reserve, debit cards, your bank account, or credit cards. PayPal won’t let you use the credit card option if you have funds accrued in your account, so the first thing you’ll have to do is clean that account out. The benefit of using a credit card for the purchase is it offers a second line of fraud defense. But wait, you might think, PayPal already has fraud protection! Yes, they do, but only if they can recover money from the scammer. How often do you think that happens? By contrast, a credit card purchase is protected whether or not funds are recovered from the seller.
Selling Through PayPal
As you probably know, PayPal also has a fraud protection program in place for sellers, but you need to be aware of its limitations. Unconfirmed addresses are not protected against chargebacks. An “unconfirmed” address is one that is not registered or accepted with PayPal. Even if you conform to their mandate that shipping be confirmed and you have your FedEx confirmation number and your buyer’s signature, your buyer can still do a chargeback if their address is not on file with PayPal. You’ll be out the payment and the product with no real recourse. You should also know that intangible items like e-books, video game accounts, electronic information, and software, are not protected by PayPal’s fraud protection program at all. Finally, only a certain volume of sales and chargebacks per year are protected. This varies depending on your eBay and PayPal status, so make sure you are cognizant of where you lie on that spectrum.
