The Unofficial Paypal

So recently I came across a few things with regard to Paypal that people may be able to use. I've been using it to repay a loan from my father and it's working rather well; no stamps or dead trees involved.

Money Market

First, if you keep a balance in Paypal and sign up for the money market, they (used to) give one of the best rates on the web. The basic idea is that they want you to keep your money with them so that it costs them nothing to move it around.

Debit Card

Second, they have a debit card you can apply for (see link below). The way this works is that it takes money out of your Paypal account, as if they were a bank (they are one in Europe, actually). There appears to be a way to use the Balance Manager to automagically draft from a backup funding source when balance dips below a certain limit. In fact, if you use the debit card as a credit card (i.e. you sign but don't use a PIN), then the merchant ends up paying 2.5+% in charges for the credit card processing due to Visa fees, and since they process it all they refund 1% of the purchase price (not the fee) to you. Basically it's a win-win situation. You can't write checks on it, but despite that I have some friends who use Paypal as their only financial institution.

Debit Card

NOTE: You have to go through a process to enroll for 1% back:

  1. Go to the PayPal website and log in to your account.
  2. Click "Profile" at the top of the page.
  3. Click "PayPal Debit Card" under Financial Information.
  4. Click "Sign up for Cash Back."
  5. Complete the process.

Skype

You can now pay someone you're talking to on Skype. Skype is free, and does video conferencing; I've never used this but you can click a menu option and pay the person as though you were meeting them face-to-face.

Paying Web Sites

It's easy to create a button for people to send you money. I have one for the users of my server to donate with. The HTML is quite easy to write, it takes just a minute or two. The only downside is that spammers who scour the web will find that email address in the form's hidden field, so I've had to add a spamtrap address to the page.

My Donation Page

About Security

As far as I know, nobody's ever lost money due to a break-in on the site; it has, to my knowledge, all been related to phishing attacks and such. If you go to the link below, you can get a security fob for $5 that makes it much more difficult to use a stolen password:

Security Key

Further, if you have your account misused, it is fraud, and you are entitled to your money back. Many people think that money taken from bank accounts is irrecoverable; that's only true if it's true; legally, you have every right to get it back and financial institutions have asset recovery teams that do this. Only if the funds are paid in some untraceable, irreversible way - such as cash or Western Union - is it difficult to trace and return. That's why there's a delay on getting money out of most financial systems.

Furthermore, I've met a person who had a Paypal account opened with their personal & banking information - they never actually opened it. The fraudster also used that info to do a lot of other things, but he said that Paypal was the easiest company to work with - he told them it was fraudulent, Paypal's customer support did some checking and said, yeah, you live in Texas not Utah, here's your money back, and they were presumably going after the woman in Utah.

They don't advertise this, but by and large, if it looks like fraud, Paypal eats the losses. It doesn't matter whose fault it is - even if you gave your account info to phishers - they refund it. There may be limitations - the account fine print is long and complicated - but according to an employee in customer account protection, they almost always make you whole.

Room for Improvement

Frozen Accounts

If you have more than 10 people transferring money into your Paypal account, occasionally you will find your funds/account frozen.

My speculation (I have never been told why) is that it has to do with phishing; it's common for phishers to steal several account logins, and then transfer the money to their account. So in the event of possible fraud, the logical place to freeze is the destination of funds.

I have heard someone say that most credit card owners only check their bill after a month or so, and by the time it gets reported to Paypal, it can be 30-60 days later. So the accounts may be frozen for some time while they wait for fraud claims to come in.

The reason there is never any explanation given (I suspect) is that sometimes they want to keep how they identify possible fraud secret, and other times it's rather ad-hoc. There are professional fraudsters who want to know when and why Paypal locks accounts, and to defeat them, they have to keep it secret from you, the honest customer.

If you depend on this money, and are used to normal brick-and-mortar banks, you probably find this of little comfort. I imagine having your only source of money frozen to be very unsettling and frustrating.

So my suggestion to Paypal is this: just as a bank may put a temporary hold on funds from, say, out-of-state checks, you should not lock accounts entirely, but only freeze the funds received in the last 30-60 days, and you should unfreeze them as they pass the 60 day window. That way you freeze the funds that might be fraudulent, and customers get to spend the money that has been in their account long enough to be legitimate. It's a compromise, but one that will probably improve your reputation.

My suggestion to credit card companies and banks is: to prevent fraud, you should allow your customers to have SMS or email notifications sent of purchases over a certain dollar amount, or more than a certain dollar amount in a day. This will reduce your fraud loss, and it will help other companies reduce their, and all customers win.

My suggestion to customers is: until this is solved, if you take payments from a large number of customers and depend on these funds (for example, if you're a donation-based non-profit), transfer your money out of Paypal every month. They can't freeze what's not in their system.

Balance Manager

One feature with potential for those of us using the Paypal debit/credit card every day is the Balance Manger. If your balance drops below:

Then Balance manager will fill it up to one of those levels.

The problem is that the "low water mark" must be lower than the "high water mark", and so I have to set the low water mark at 200 and the high water mark at 500. Furthermore, the transfers take 3 business days (potentially 5 or more calendar days), so this means I have to spend less than $60 a day to make this work.

Unfortunately, a single electricity bill here in sunny California can cost me $700 (I pay $0.39/kWHr... isn't California great?). So obviously this system isn't set up for my kind of usage.

Suggestion to Paypal: raise these limits. Make a low water mark of $900 and a high water mark of $1000, and you'll get a lot more transaction volume. These limits are for mickey mouse stuff. Let me help you "float".

Is It Prepaid?

Some places will not accept a Paypal debit card, stating that it is a "prepaid" card. I am not sure why this is, but it's annoying. I want to use Paypal as my only credit card, and it is most definitely not a prepaid card.

For example, a rental car company and a hotel wouldn't take the card. Since I don't have "a credit card" (those companies are vultures, jacked my rates up to 33% APR when they failed to process my payment by phone), I had to pay a cash deposit. I'll never have a credit card again.

NSF

I've noticed that sometimes, a payment when my balance is zero will result in an e-check being written, funded by my bank account. That's fine, great, dandy. But other times, things will ring up as NSF (insufficient funds). That sucks, makes companies spend money to contact me, takes time out of my day. I'd like to keep a lot of money in Paypal, and funnel all my charges through it, but Paypal doesn't seem to be sure if they want me to do that or not (especially with the balance manager limits mentioned above).

Scheduled Payments

One donation-based non-profit I work with has a problem where member's scheduled payments (I do not know exactly which payment system they're using) stops working, silently, without explanation.

This happens to a few members every month, and results in many lost dues. But worse; there's no notification or explanation of why this happens. This is very frustrating to them.

My suggestion to Paypal: Fix this. Listen to your customers.

Rolling Reserves

Oh man, oh man. This is going to create problems.

I'm unclear on the policy; does this apply only to CC-backed payments, to all payments, or (worst of all) to balances?

If it applies to balances, I'm going to dump Paypal and consider alternative payment sources (like AMEX).

Summary

If you've found this useful, please forward it to the Paypal users you know.

If you know a Paypal employee, please email this to them so we can get some of these issues fixed. It helps Paypal and their customers.

Dead Features

These no longer are supported.

Secure Credit Cards and the Paypal Plug-in

I haven't used this, but it looks like you can create credit cards that can only be used by one merchant. This is great when you don't trust the security of the web site; if it's stolen, it's no good to anyone else.

Here are the details

Here's a Windows-only plug-in that makes it easy.

Comment: awesome idea, great to reduce fraud, good for Paypal and users, poor UI, poor consumer awareness. Bring it back! And don't make it Windows-only; the whole point of the Internet was that any OS could use it.


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Travis's Homepage travis+web@subspacefield.org
Original date: 2008-ish
Updated: 31 Aug 2010