PayPal Online Payment System Review
July 21, 2008
Paypal is becoming a more-ingrained part of the Internet. If you’ve ever been worried about security problems using Paypal, keep reading. The service is pretty invaluable, but it’s also had some ups and downs.
What exactly is Paypal: it’s a online payment system allowing payments online without having to deal with money orders, checks, or inputting your credit card on a new site. More and more vendors are incorporating Paypal into shopping carts. For vendors, this is a cheaper and easier system than creating a merchant account for credit card processing. For spenders, it’s easier to have one type of payment system. Paypal users enter in a credit or debit card number and the funds are taken out that card. This is a free service for the majority of users, but people with a very active account, such as top eBay sellers, will need to get a higher-end Premier account to process additional transactions.
Paypal also accepts payments for individuals, rather than businesses. Each user can be paid through an email address – though basic accounts are limited to 5 debit card transaction and $500 per month. Once the funds are uploaded to Paypal, the user has a number of choices. Most commonly, users transfer these funds directly to a bank account. This is free, though a bank could charge for the transfer.
There are some fees associated with Paypal – but these are normally associated with online vendors selling a product, rather than people making purchases. There can be increased fees depending on the country of origin, type of currency, and the amount of money sent. Currently, Paypal has 164 million accounts and operates all over the world in 190 markets.
Problems with Paypal
Paypal is not without its problems, as exemplified by the site, Paypalsucks.com, which is on a crusade against the money transfer company. Their main complaints against Paypal are:
- Limited fraud protection. Unlike credit cards, if someone uses your Paypal account, you could be liable to those charges. However, if the Paypal account is connected to a credit card, you could dispute a purchase directly. In addition, Paypal offers increased anti-fraud and chargeback protection now than when these types of charges were first made.
- Paypal is vulnerable to identity theft, such as phishing scams, in which scammers set up dummy, look-alike sites to get financial information. If you’re the victim of one of these scams, Paypal has limited protection for users.
- It is at Paypal’s discretion to freeze or unload your account if they feel there has been unethical or fraudulent activity. This has happened to people who were entirely innocent, or they were penalized because someone paid them with a stolen credit card, which is entirely out of a person’s control.
This post doesn’t mean to shill for Paypal, but none of these issues appear to be too drastic. Take #2: any web surfer should be well aware of phishing and spam email schemes, so the surfer does bear some responsibility. A couple of years ago there were a lot of spam Paypal emails phishing for info, but these have fallen back a bit recently. A way to avoid #3 is to transfer funds as soon as their received in the account. However, if you’re using those funds to buy things, rather than attaching the Paypal account to a credit or debit card, then you’re going to have to leave the funds standing. The recommendation: attach the Paypal account to a card with some consumer protection.
Finally, a MAJOR caveat to those complaints. The PaypalSucks site links to a Paypal alternative called National Merchant Bancard, so there is something slightly duplicitous about the site itself. That said, the site does raise some issues that you should look out for. Generally, you should feel pretty secure using Paypal. The value in Paypal is that it is actually more secure: instead of plugging in sensitive financial info on an unverified website, you can pay through Paypal and feel more secure about the transaction.
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