My PayPal credit card beef, Part II: PayPal responds

My PayPal credit card beef, Part II: PayPal responds

Summary: Maybe my PayPal whining will result in some sort of change, after all.In a post yesterday, I wrote about what I felt were unfair policies involving credit card fees on PayPal.

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TOPICS: Banking
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Maybe my PayPal whining will result in some sort of change, after all.

In a post yesterday, I wrote about what I felt were unfair policies involving credit card fees on PayPal. Specifically, I was frustrated about the fees incurred when using a credit card. Currently, a sender has the choice at the time of the credit card transaction - pay the fees (which are roughly 3 percent plus 30 cents) or pass them along to the recipient. I argued that there should be a way for recipients to block credit card payments where the sender has asked to pass along the fees. Currently, there is no way for recipients to block such transactions.

The post received a fair amount of feedback from some pretty passionate readers and I also received several private e-mails - some nice, some not so nice. One of the emails came from Anuj Naya, director of global communications for PayPal. He wanted to chat about the post and wanted to let me know that there was, in fact, a way for recipients to refuse credit card payments. To give it a test-run, he sent $1 to my PayPal account via credit card - which ended up being only 67 cents, after the 33 cents in fees were deducted.

It turns out there's a way for me to refund, not refuse, the payment. That's what Naya was talking about. Recipients who see the credit card payments in their inboxes have 30 days to issue a refund, essentially kicking it back for any reason, including the fees. That's nice but that's not what I'm talking about. If I'm collecting from 100 people and half of them go the credit card route and pass them along to me, that's 50 refunds I have to process. Wouldn't it be easier for those to automatically get kicked back to the sender?

That's all I'm saying.

Naya said he also misunderstood exactly what it was I was trying to do and acknowledged that, currently, the service does not allow recipients the flexibility to decide how credit card fees will be processed. He said he'd pass along the suggestion to the engineering team and I agreed to write about changes they make to meet this need.

I seriously hope that eBay takes this one into consideration. If eBay wants to grow PayPal the way it has said it wants to, then it really does need to recognize that buyers and sellers aren't the only ones who exchange money. There's a whole market of people out there - from office coffee funds to friends pitching in for a big wedding gift. Debit cards have all but eliminated the need to carry cash and checks and it would only make sense to enable everyday folks to pitch in this way.

If you're the one who's collecting for the wedding gift - and pitching in, as well - do you really think it's fair that you have to take a $3 loss out of your own pocket for every co-worker who chose to pitch-in using a debit card?

I don't.

Suggested reading: Internet slowly wakes up to PayPal's quiet fee hike

Topic: Banking

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106 comments
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  • Ebay & Paypal

    Doesn't it equal "double-dipping" when both Ebay AND Paypal charge a seller when (1) an item sells on Ebay, and (2) a seller receives his payment through Paypal? A seller pays to post an item, pays when/if it sells, then has to pay Paypal again when he receives payment through their system...even though it's owned by Ebay.

    I'm really considering closing my Ebay accounts because of this AND because they are really making it harder for sellers to lose out on merchandise and money by giving buyers way too much freedom. A person could complain about the minutest of difference in an item description and just about be guaranteed a refund. Some buyers also do credit card charge-backs and the seller has no way of recouping their money OR their merchandise!

    I used to enjoy using Ebay, but no more...
    davidcantu1970@...
    • PayPal Charge Backs

      This issue is discussed in forums frequently.
      PayPal is a secure way to BUY but very risky to
      sell and collect payments.
      If you had your own credit car processing arrangement with a credit card processor like First Data in legal terms you are the Merchant in the transaction. There are two legal entities in a CC transaction, Merchant and Buyer. These are the only two entities with legal rights in the transaction. If you are not the Merchant or Buyer you cannot even contact the credit card issuing bank to discuss a problem.
      If an eBay seller accepts PayPal he must accept all transactions whether made with CC funding, eCheck or cash balance.
      Credit card transactions can be reversed by the buyer through the CC issuing bank for up to 6 months after the sale. Different banks have different policies on allowing this, some do it with no investigation at all. If the eBay seller is also the Merchant in the transaction, he has recourse to challenge the reversal with the CC issuing bank. If he is not the bank will not even talk to him.
      In a PayPal transaction PAYPAL is the Merchant.
      This further complicated by PayPal policy to only make one attempt to reverse a chargeback.
      Effectively this is a wide open invitation to fraud.
      PayPal terms and conditions allow PP to take the funds for a CC transaction back out of your account for 6 months if a chargeback occurs. This is totally outside the very fair dispute resolution tools offered by PP. A buyer could persuade his bank to reverse the charge at any time during that six months with no warning to the seller and if his bank agrees, keep the goods and his money leaving the seller with no option except to sue in civil court in the seller's state.
      The bottom line is that no sale paid with PayPal is "closed" for six months.
      Whereas the risk is acceptable for small ticket items it is not good business for large ticket items, especially for a small private seller offering used equipment on eBay.
      This all happened to me and to, it seems, many others who revealed this experience in forums on the subject. More and more sellers are refusing PayPal for that reason. Most small sellers are not aware they have no legal recourse with the CC issuing bank and though the PP terms and conditions do state PayPal has the right to take back the money if a chargeback occurs, most small sellers never read all that boilerplate fine print until it happens to them.

      Some payment processors who deal with small businesses will vigorouslsly challenge chargebacks on behalf of their CC processing customers; PayPal will not. The seller involved in one of these frauds is left to take the loss wit no help from PayPal to recover. This type of fraud is growing. The perpetrators go after big ticket items. The laws in some states are so "grey" in this area that it is not even considered a crime but a civil suit actionable item called a "conversion".

      Most eBay sellers are shocked to learn this about PayPal. eBay has turned what was invented as a payment method for on line transactions into essentially a CC processing system but without legal rights beyond PayPal. For a wile PP would allow you to create a "Basic" account that did not accept CC's/ You could opt to decline a CC funded payment. Because of the CC chargeback issue this became very popular with sellers at the expense of so called "Premier" account sales. PP current Basic account T's and C's do not allow you to decline CC payment and mandate that you MUST convert to a Premier account if anyone pays with CC.
      What is needed is two types of accounts. The original PP type that has no CC funding and the current variety that does. I would gladly pay the collection fee for a PP payment but am unwilling to have sales open ended for 6 months with no fraud protection.
      The buyer in my case has the goods and his money and does not respond to email or snail mail.
      esale
    • Amen brother

      And you cannot accept any other form of payment any more. I agree the buyer has the power. I was recently held hostage by a buyer for a partial refund.
      I wish there was a competive alternative that CrapBay didn't already have their finger in.
      Oh yeah when I refunded the guys money I paid for it. I also paid when he sent the money originally! I really lost. Cause I had to pay FeeBay to! ARGH!!
      Russell Gates
      • RE: My PayPal credit card beef, Part II: PayPal responds

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    • eBay: now just another Ticketmaster

      Ticketmaster and eBay essentially laugh in your face as they raise fees that they have long since given up even trying to excuse.

      eBay is daring you to prove that you're not as stupid as they think you are.

      So what are you going to do?
      dgurney
    • paypal ebay is a seller grinder

      My objections to paypal are these:

      Ebay forces the seller to offer paypal against their will, incurring unneccessary fees.

      There is no way to automatically make the buyer incur the fees for what amounts to -their- convenience. Maybe that is because it could discourage buyers from using paypal. Isn't that a conflict of interest?

      The buyer can esily lie and screw the seller out of the money after receiving the item, and the seller has little succesful recourse and is still out some fees plus the item might never be returned.

      The entire thing is set up to make it risky and costly for the seller and easy for the buyer. That is not fair and square either.

      For these reasons I never sell on ebay any more. Sorry, I do not believe in giving money away and taking these risks for no good reason. I sell from a website. Thank goodness I don't have to make a living off ebay.
      Opcom_
  • Do you think using a CC is free?

    Visa makes money on every transaction. Paypal has processing fees for CCs. It has not ever been free to use a credit card.

    Trying to block a transaction with a credit card may not be possible and paypal wants you to pay the fees (and all other possible fees). It is not in their best interest to block CCs transactions.

    In the early days (2000s), only paypal premiere users could accept CCs. If you wanted a CC payment you had to sign up for premiere or a business account. Can one still do that?
    Eriamjh
    • Premier service

      Premier service used to be (and perhaps is) a bargain with the devil.
      You except ONE credit card transaction by bumping to premier, and
      EVERY transaction has fees taken out - even paypal to paypal which
      would normally be cost-free.

      I've been doing paypal for big events, and I personally end up eating
      the fees. Other people have a "paypal surcharge" which may be
      higher than the actual fee. I understand that credit cards carry fees,
      but there should always be a choice between the buyer and seller
      paying them... Ideally for a seller who blocks fees, the buyer would
      see the additional fee as part of the transaction (like sales tax). Is it
      really so difficult to set up a paypal account and attach it to a bank
      account?

      Bank of America allows account holders to pay other account holders
      for no fee. Other banks may follow. This may take away some of the
      non-Ebay business from PayPal.
      a.barry@...
    • PayPal is the reason I quit using e-bay

      But why should the purchaser even have to go through PP if the merchant accepts a CC? I quit using e-bay when they changed the rules about feedback and required PayPal.
      rdhalsteatzd
  • Enough Beef Already

    The paypal system already works better and easier and cheaper I might add than the competition. They also have no monthly fees no gateway fees and non of the other fees associated with other merchant companies. By bringing this up again your loosing credibility with your readers. $.03 and $.30 cents is a heck of a deal.
    docquesting@...
    • It's not $0.03 and $0.30... It's 3% and $0.30...

      He's right, if 10 people go in on a gift at $50 each, and all of them use their credit card, the collector would be left paying $18 in fees... Or the gift would have to be $18 cheaper. Given these fees, people would rather just collect the money in person, in cold, hard cash.
      rfnajera
      • Explain your math....

        If each of your 10 people pitched in $5 (for a total of $50) then 3% of $5 is 15 cents per person - or $1.50 total.

        The 30 cent fee, times 10 people, equals $3.00. Added to the $1.50, that equals a grand total of $4.50 in fees.

        Where the hell do you come up with $18 in fees?!?!?
        moviedemon
        • explain your math

          he said that each person pitched in $50 not that the total was $50 - his math is correct.

          in other words, for pretty small amounts ($50) there is no particular issue. But he is talking about situations where the total amount can be fairly large - in which case the paypal fee starts being noticable
          jg@...
          • explain your math

            jg said
            > in other words, for pretty small amounts ($50)
            > there is no particular issue. But he is
            > talking about situations where the total
            > amount can be fairly large - in which case
            > the paypal fee starts being noticable

            Actually, it's the small amounts where it takes the biggest bite. e.g. as in the example given iin the article - you send someone $1, paypal charges 3% (it's actually 2.9% if you read the fine print) plus 30 cents, for a total of 33 cents, or a 33% fee on a $1 transaction.
            Darr247
        • Math explained

          He said $50 each for a total of $500. I wish I
          had 10 friends like that!
          Still, we've got the $3.00 for the 30 cent fees,
          adding $3.00 + (3% * 50 * 10) = $3.00+ (500 * 3%)
          = $3 + $15 = $18

          Math checks out although the premise is a tad
          thin.
          goldenpanther
          • Ahhh... that makes sense... sorry.

            Sorry, I should have read it closer. [embarrassed]

            Still, $18 out of $500 doesn't seem too bad for the convenience of being able to accept credit cards.

            I guess if someone was really worried about this scenario then the solution would be to roll the fees into the "price" just like retailers do.

            If you're trying to raise $500 for a gift, tell everyone you need $550 - that way you can cover credit cards fees and sales tax.
            moviedemon
    • Which part of ZIPPO protection did you miss?

      PayPal is quite clearly stacked in the interest of Paypal and offers NO protection that'll cost itself anything. Look a bit deeper and you need to do all the spadework and try to talk to the other party. If the 'problem' can't be resolved or they ignore you (pretty likely), PayPal will post the money from their account if they have cash available. If they've taken all the cash out (as I do immediately now) you get zippo !

      It's a shocking system that you can weigh up the risks for ebay but nothing else. Even on ebay I pay with a standard card (rather than a debit card), through Paypal, in the hope it at least offers some protection.

      Luckily most folk appear to be honest and are happy to pay the fees for a smoother transaction on ebay. I certainly wouldn't want a paypal card for anything else. It's way off the mark; and totally stacked in favour of itself.
      johnmckay
  • My question is this..

    Why do you have such a big deal with it? You made mention of people sending you paper checks...BUT if they had a paypal account - they could use the EFT/ACH system to move say $100 from their linked checking account using "Instant Transfer" - and its processed free of charge.

    I think you are just kicking and screaming about CC fees because you dont fully understand them. Everytime YOU use your card somewhere, that merchant takes a hit. Its also against Vista/Mastercard regulations to levy charges against the consumer/buyer for using a credit card (this is semantics - but thats the gist).

    So you cant use the credit card part free of charge - but you can use the Instant transfer. Try it out - you just may find it IS what you are looking for. Oh and block the acceptance of credit cards so no one gets confused :)
    JT82
    • My question is this..

      My question is this..
      > You made mention of people sending you paper
      > checks...BUT if they had a paypal account -
      > they could use the EFT/ACH system to move say
      > $100 from their linked checking account
      > using "Instant Transfer" - and its processed
      > free of charge.

      You are sadly mistaken. Paypal takes the 2.9% + 30 cents/transaction fee from EVERY transaction, not just credit card payments. If you do more than say, $10,000 per month with them for 3 months in a row, they'll give you a rate lower than 2.9%, but for the average joe/ann the max rate is 2.9% plus 30 cents per.
      Darr247
    • V/MC levied fee

      My understanding as a business owner is if you own a service business with no merchandise on the table you can add a "Service Fee" to cover the loss of labor wages from use of a credit card.
      Russell Gates