Over at Quora, the subject of PayPal came up in the course of a discussion comparing US payment methods with those in Europe. Over there, checks are obsolete; electronic payment transfers are ubiquitous. Zelle is popular in Europe, as it is with major American banks. But credit unions do not exist there, and my credit union (which unlike a large bank treats its customers humanely) does not subscribe to Zelle.
One correspondent remarked, in praising Zelle:
Checks are so dangerous. You are handing people a piece of paper with your name, address, bank name and full account number, and at retailers they often notate your drivers license number and phone number too, and you top all this info off with your signature. Everything a fraudster needs!
Said I:
Credit unions don’t offer Zelle. PayPal dings you a stiff fee for every transaction and will not allow you to transfer a client’s payment to your banking institution for three months after the client pays. Also, by claiming not to be a banking institution, PayPal evades regulation by US banking authorities….and as my own experience has shown, that is FAR more dangerous than checks. When they choose to rip you off, you have exactly zero recourse to the law.
Flabbergasted, another commenter added:
We didn’t either, until…. My business partner, who had set up the PayPal account and had it attached to her bank account, decided to go back to graduate school by way of changing careers. We decided it would be better to de-attach the years-old PP account from her bank account and associate it with mine, instead. This didn’t work. So, to accomplish our goal we closed that account (or tried to close: it develops that a PP account actually never goes away…) and opened a new one — also in the S-corp’s name, same as the old one, only with the corporate bank account as its stateside institution.
First client that paid, PayPal REFUSED TO FORWARD THE FUNDS to my account. I was informed I would have to wait three months to receive payment, unless my client communicated to PayPal that she had received the services for which I had charged her.
She did so.
Nothing.
She did so again.
Nothing.
She did so again.
After my client had tried THREE TIMES to persuade PayPal that I had done the work she was trying to pay for, I gave up in disgust. I returned her money to her.
She attempted to pay me through PayPal again, even though I asked her not to do so — said I would comp the work.
Again PayPal glommed her money and would not let it go.
Finally I again managed to have her money returned to her.
PayPal works fine when PayPal is working. But when it doesn’t work, it’s downright larcenous. After this experience — and after learning about other people’s experiences — I would never recommend doing business through PayPal.
As for trying to get untangled from PayPal: you can’t. You can try to close a PP account until you’re blue in the face: the damn thing will still lurk there. Finally, the manager at my credit union decided the only way to protect my business account’s funds from hacking would be to close the business’s corporate account and re-open it so it would have a different account number.
It’s important to understand that if a problem with PP arises, you have no recourse. PayPal has persuaded US regulators that it is not a bank, not a financial institution — even though as a practical matter that’s exactly how it functions for its customers. Consequently, US regulators have no influence over PayPal’s behavior. And that behavior can be pretty bad.
PayPal is essentially unregulated in the United States. It is not a bank. It is a privately owned corporation that can do pretty damn near anything it wants. And anything it wants is not necessarily in your interest. The complaints posted online at the Better Business Bureau — presently numbering 8,696, are just the tip of the proverbial iceberg. Pissed Consumer reports three issues resolved of 635 reviews, with $1.9 million in claimed losses. A whole website is devoted to publicizing PayPal’s outrages.
Here’s an alternative that might work for you: a reasonably low-cost system that accepts all major credit cards, with transaction rates that undercut PayPal’s, especially if your clients are overseas.