November 13, 2005

Paypal is a quick method to accepting online payments, however there are certain rules that you must follow in order to comply with there seller’s protection rules.

You can send money for free, however to receive money but you will get a fee charged a lot like a merchant credit card processing service.  If you are a small business that does not have credit card services, or would like to sell online without getting a merchant card service account, this is the easiest method to receiving money on the internet and Paypal is greatly recognized and used by many.  Paypal is also owned by Ebay.

There are pitfalls with any business, but when you accept credit cards and Paypal you should process the order and ship it within 48 hours from receipt of payment.  You should not ship to an unconfirmed address in Paypal as it offers you zero seller’s protection.  If you don’t care if you lose the whole transaction you can still ship it but you are the one that is responsible for shipping the order.  It can come back to haunt you. 

The bad part about Paypal is that there is no time cap for customer chargeback's that we are know.   We have had orders 6 months later show up as a fraudulent transaction.  So it is very important to ship only to confirmed addresses.  You can specify this in your preferences in a Paypal account.  You will need to also consider that a majority of fraud with credit card comes from international transactions.  You will need to decide if you want to ship internationally.  We found that if you are not making a big profit margin this market was better left alone, not only because of the extra processing fees involved, but also because of custom forms and extra time spent processing these orders.

The good news if you are diligent with shipping promptly to a confirmed address and getting signatures for delivery over $100 you should be covered by the Paypal Seller’s Protection program.  That means that even if the person decides to say it was fraudulent, or not received you will not lose on the transaction if you have the information.  If you can provide proof of delivery, and that you shipped to the confirmed address you will qualify.  Do be aware though that you need to remind the chargeback reversal emails with Paypal that you have complied and are eligible for Seller’s Protection program. 

The bad part about Paypal is they tend to favor the consumer on everything.  That is why it is so important to be prepared and to have your information to reply promptly to any disputes.  You have a 72 hour time frame to reply to the chargeback / dispute.  They do not state business days, so you might need to act within 1 – 2 days with a response.  Always keep your tracking number references ready to look up from the shipping software.  If you are small and don’t have an account to ship with, type all your tracking numbers in an Excel spreadsheet so that you can use a find command to locate the information.

Even if you win on your favor which with good accounting you can achieve this, Paypal has a tendency to sneak back in a reverse the chargeback against you for a second time without negotiating with you.  We have had this on more than one occasion.  Paypal approves us for the seller’s protection, and then 3 weeks later cancel this and deduct it back from our account again.  This is when you have to call them to let them know what happened.  You keep all your email communication with Paypal.  Usually after this they will credit your account again in your favor.

If you don’t log into your Paypal everyday, you might be making a big mistake.  You might be counting on Paypal to email you of any problems, every once in a while that email may fail to get through to you.  It is your job to make sure that your account is in order.