I wrangled customer support, got nowhere, and had a fat negative balance in my account, but I figured I was okay -- until six months later, when I got sent to collections, when I gave collections the money and then sued Paypal in small claims court (this might not have been the wisest move in the world; given recent experiences: http://jseliger.com/2010/08/28/dont-rent-an-apartment-from-n... , I don't think I'd bother with the same course of action today). Their EULA says you can't do that, but they offered me half the money to make me go away, which I did.

The moral of the story: I no longer use Paypal. Ever. For anything.

Moral #2: the horror stories are real.

EDIT: One other thing -- if you are selling virtual services, Paypal will not back you up. If I'd been smarter, I would've shipped something to the client's address, with a tracking number, which might've helped me.

It's Paypal's fault if the company makes it appear that I have the money safely in hand... and then it turns out that I don't. If someone sends me a check, and I deposit it, within a day or two I know the money is mine and can't be yanked back.

Furthermore, they don't make it obvious that they'll do this. It's yet another "gotcha." As another commenter noted, Paypal is great, right up to the point you have a problem, at which point they're terrible to me.

No company is more indicative of the power of Metcalfe's law than this one: that another, less jerky company hasn't superseded them is amazing.

Not true. Any and all financial transactions are reversible, per US law.

They don't make it obvious that they'll do this

This is a standard policy for all electronic funds transfers, not specific to Paypal.

I have yet to lose on a chargeback or dispute.

That said, sweeping the PayPal balance to a real bank account is always the smart option.

Some of that is eBay sales transactions, some is merchant account transactions for online stores, and some is recurring billing for a subscription site.

We have had our account frozen several times with substantial amounts of money in it (like a whole month's worth) and had some stressful moments when we were trying to figure out how to get the cash out of there so we could pay our American Express bill on time.

Over the past 5 years we have had numerous designated representatives but all in all they were difficult to connect with and provided little value and I can't recall a single instance where they were able to go above and beyond to help us. (The same also goes for the eBay Powerseller representatives we have had over the years.)

We have had random instances where funds are flagged as being questionable and Paypal seems to be inconsistent. For example, just 2 days ago we sold 2 items on eBay totalling about $2500. Paypal/eBay said the transaction was approved and told us to go ahead and ship it, so we made preparations to do that. The next day they flagged the transaction and told us that unless we could provide proof it had already been shipped the funds were going to be pulled. Our options were to either refund immediately or just wait and see what happened, which is what we are doing. We just need to be careful because they could arbitrarily just take the funds in a state like this and we would be out both the cash and the merchandise.

Ultimately this sort of stuff has driven us to migrate our online stores over to Braintree.

If you are just doing consulting it shouldn't be too bad, just always remember that there is no amount of business you could do with them that would cause them to care about you as a customer.

Once you fall afoul of them, which can happen for something so trivial and non out of the ordinary that it takes a while to even understand what they could be having a problem with, they'll lock down your account and essentially shut down your business until you jump through a long series of hoops, each more difficult and less reasonable than the last.

If you're lucky, after a couple weeks of opaque and contradictory communication with them, they'll let you continue running your business. If not, you get to scramble to find another way to collect payment.

My advice is to skip all the above and go straight to the "find another way to collect payment" step. PayPal would be a great way thing if they were reasonable, or even rational. But they're not. It's just not worth it.

In four years, I've had one glitch (which I was able to work around) and two disputed transactions. All issues were addressed with quiet professionalism, as I would expect from e.g. a bank.

I have no major complaints.

When you set up a Paypal button, use the Merchant ID instead of your email address. Even better, use the public key encryption to encrypt the form.

Don't let money accumulate in your Paypal account. Or any of the alternative systems for that matter.

See if your bank will allow you to have a separate account for inbound transfers, separate from your primary checking account. Link this secondary account to any services you want to use, not your primary account. When you receive money, transfer it from this secondary account to your primary account. You still are legally on the hook for legitimately reversed charges, however this lessens the opportunity to have your primary account drained due to fraud.

If you're doing frequent transactions (multiple per day) look at utilizing the Instant Payment Notification (basically a webhook) to get an instant notice about payment and other activities, rather than rely on email delivery.

Look at Amazon Payments and Google Checkout (may have more country limitations than Paypal has).

Have a backup plan ready for the day Paypal does decide to freeze your account, for whatever reason.

I have an Amazon Payments account as a fallback if I need it, but so far I haven't (knock on wood).

I know all about the PayPal horror stories, but there is one feature that makes me stick with them: the PayPal debit card which is linked directly to the PayPal account. A customer can make a purchase at 10:00am and at 10:01am I can withdraw the money at an ATM, no waiting a week or so for the bank transfer. Since I deal with physical items, this quick turnaround has really helped me with inventory, and no one else offers that kind of access to the cash (other options will allow you to withdraw the cash immediately via a direct bank transfer, but as I said, that can take several days).

The moment a bank or another site offers that kind of direct cash access + easy web form processing is the moment I drop PayPal, but for now, they're the only game in town.

We have had a few chargebacks which in some cases were decided in our favour. Afterwards I simply refunded the customer informing them they should have just asked for a refund :)

Any time I've had to contact their technical support via email, which is rare, it's been useless.

Their APIs are a mess. Documentation is all over the place and far too verbose. Many of the APIs overlap leading to further confusion. This isn't much of a problem if you use a cart or Rails Plugin but if you're coding your own stuff from scratch prepare to suffer. That said, once you understand it and get it working it's actually pretty good. You'll find there's little you can't do using PayPal.

The sandbox does a decent job of allowing you to run tests, but it does have some frustrations. You have to go through many steps to set things up. They have an IPN generator but it leaves out some important notification types for subscriptions. It's also totally separate from your real account, so even if things work in the sandbox, if a setting differs in your real account it will break in production (this has happened to me).

Their reports are okay but the website is pretty slow so getting at them is a pain. I hate going into the website because of the slow page loading.

If you do go ahead with PayPal I would recommend using it for a large volume of small one-off payments (means a lower risk from chargebacks). I use it for subscriptions but don't like the fact that if I have a problem with them I'll have to get those customers to sign up again. Always transfer money from it once it gets over $100 and create a separate bank account dedicated to PayPal. Regularly transfer the funds from it into your real account. Always have a backup payment source so you aren't losing sales if you encounter problems.

I'm American, but 7 or so years ago when this happened was living abroad, had no credit card, and wanted to buy things online. So I created a PayPal account and transferred $100 in from a bank account. I then tried to make a purchase, but found that as an outside-the-US user, I would not be able to make payments until I registered a credit card with them. I couldn't qualify for a credit card at the time... oh well. So I tried to move the money back to my bank account. But that transaction was covered by the same policy; I wouldn't be able to do it until I registered a credit card with them.

Looking through the ToS, I found that this rule was in there; an international user had to register a credit card in order to disburse any funds from the account. So the fool in this story is indisputably me. Still, I found it hard to believe that the system was set up to allow black hole accounts, which money could enter but never leave. Over a lengthy email exchange, I was assured that such accounts were indeed possible, and that I had created one.

Eventually I let go of the $100. But I never let go my scorn for PayPal.

Pros of PayPal IMO: ~Handles multiple currencies well (I get paid in CAD, USD, and EUR). ~Easy for clients, takes care of basic invoices, keeps a history of everything. ~Payments from other accounts or credit cards are nearly instant ~Decent API for implementing a 3rd party shopping cart quickly (selling goods, donations).

Cons: ~Bank transfers take 6-8 business days (very inconvenient, I understand things take time but c'mon, we live in a very automated world now). ~It's digital money, PayPal could go bankrupt and you'd be, well, screwed over. ~Support emails generally take awhile, from other peoples experiences, this seems to be a Canadian thing.

https://www.paypal.com/cgi-bin/webscr?cmd=p/gen/travelers-ou...

I have the email address pwelch@gmail.com.

Every P. Welch in the world seems to be under the mistaken impression they have the email address pwelch@gmail.com.

PayPal has no mechanism for the legitimate owner of a given email address to stop people from registering PayPal accounts on that address, or to fix it afterwards.

Aside from that annoyance, I haven't had any problems with them.

It was more of a privacy problem than a direct monetary one (able to view the registered address for any user given their email) but this made it clear to me that they had some serious problems with security.

I continue to use them to make payments as a user, but prefer not to trust them with access to my full bank account. As a business, I'd avoid them if there was a reasonable alternative.

Two years ago, a friend owed me about $200. To pay me back, he sold a camera he owned on eBay and then promptly sent me the $200.

Another friend was in some trouble trying to pay for textbooks, so I offered to loan him the money. I sent him that $200 via PayPal and he went to the school bookstore to purchase books.

A week later, the buyer of the camera made a claim against my friend stating that he misrepresented the camera. Despite the fact that I had nothing to do with the transaction, they un-moved the money my friend had sent me, sending my account negative $200. I've sworn ever since that I will never do business with PayPal again.

- With that said here are some tips: Don't ramp up with paypal right away. Start running a small business out of it, somethings doing a few hundred dollars a month and ramp it up. If you are going to do an odd amount of business (like a product launch) than call them up and give them a heads up. They will make a note in the system.

- Alternatives: We found another payment processor through a drop shipping company we use. Because they have a much larger account, they we're able to get a cheaper payment processor to look the other way in regards to tobacco sales.

My rule #1 with PayPal: drain it weekly or after $200 bucks accumulates.

Everything Paypal does is generally logical, even the chargeback handling and the occasional freezing due to suspected fraud.

Though I would prefer it if Paypal refrained from trying to handle disputes and just concentrated on handling payment transfers. Chargebacks are the bane of a freelancer's life especially when there is no proof of the service provided.

Paypal payments should be like actual cash transactions, once you pay the money to someone, it should be gone for good. If you have any disputes, handle it yourself.

Though I don't know how Paypal could make that work with credit card payments where buyers have the option to initiate a chargeback.

My building's mailbox at the apartment complex where I live/work is easily & frequently compromised by mischievous kids, so receiving mail here isn't an option.

Instead I use a separate P.O. Box for both business and personal mailing addresses.

My shipping & receiving is at a local Pack & Ship, except special deliveries which are scheduled at a gated storage unit. Neither of which can be expected to receive mail on my behalf.

When I wrote to PayPal after seeing that they disallow the use of P.O. Boxes, I thought of these horror stories we read about with them and basically decided not to go ahead using them before they replied.

This decision was reinforced afterward when they eventually did reply, it wasn't clear if they'd even read what I'd written or if it was scanned by a bot. I received what seemed a 'canned' response that was worded such that it was clear they would be 'sticking to their guns/policy' and weren't going to even try to be helpful.

So, they won't be connecting to my business account.

On the flip side, the one good thing about them is their adoption of the Verisign cellular keychain token, which changes the multi-factor authentication code over the air every minute or so.

It just occured to me that maybe there is an opportunity for someone to make a payment-systems abstraction layer. Does that exist yet?

From the perspective of my website, I don't care whether someone pays with Paypal or Google Checkout. Both transactions are wrapped by e-junkie in a consistent API, then POSTed to a URL I gave them. Some Rails magic handles it from there.

But the speed of setup, relative low cost fees and ability to gather US dollar payments from outside of the US meant it was, at the time, the only viable small scale solution.

In the future for anything larger I'd do more thorough investigations on looking for alternatives. I also wouldn't want to have my business completely depend upon the whims of Paypal based upon their lack of good customer service.

But, it is only available in a few countries so it may not be available to you.

I use Plimus for payment processing, and they accept payment by Paypal. So I can accept Paypal payments without the possibility of ever having to deal directly with Paypal.

As as customer, I used to like to use Paypal because it was convenient and low-risk. I'd never deal directly with them as a merchant. I feel sure that my relationship with Paypal would become the 'top idea in my mind' at some stage and might take aways days or weeks of productivity.

Their name recognition and well-established subscription API is a good choice for my subscription-based web apps.

However they limit the amount of money you can withdraw per month unless you "verify" (or something) your account by giving them details like your SSN or additional bank details. Might be a turnoff for you if you're doing this strictly small-time.

As far as their anti-fraud measures, I've been stung by them repeatedly. I don't have a home base; I travel while working. This means I'm constantly accessing Paypal from different IP's in different countries, some of them scary-sounding to a bank-like entity (Thailand, Vietnam). Their system automatically freezes your account if they detect too much access from foreign IP's.

When your account is frozen, you can continue to receive money but you can't wire it from PP to your bank. So basically if you're unable to convince them that you're legit, Paypal has stolen your money and you'll never see it again.

For this reason, I never keep a balance of more than about $300 in my PP account. I always withdraw immediately as soon as it goes over that balance to hedge my bets against Paypal freezing my account permanently.

To be fair to PP, every time I've called them I get a very friendly person on the phone who is obviously US-based (a nice touch these days). They've always restored my account after asking me some basic personal info questions. However there's no way to put a permanent note on it saying "this guy travels a lot, stop freezing it you idiots." In fact I've (no joke) had it re-frozen right as I was in the middle of talking with a service rep who had un-frozen my account 30 seconds earlier.

Additionally, the PP website will demand all sorts of scary-sounding information from you to automatically un-freeze your account (utility bills from your listed address, scans of checks from your listed bank account, etc.). Problem for me is that since I have no home base, my listed address is my parent's house; if I send a utility bill without my name or my company's name listed, will they believe me? And you can't change your personal details once your account is frozen, so there's no way to go back and change the address to something you can fudge into a working solution.

But fortunately in the past I've just called them in person and they've sorted it out with minimum hassle. Though that's mighty inconvenient for me when I have to find a Skype-capable internet cafe in a Vietnamese rice-farming village at 3am. (I've since bought my own mic just for this reason).

And finally, after calling to complain so often, they offered to mail me a security card to stop this from happening. It's a little debit-card shaped thing that generates a number when you press a button. You enter that number when logging in so they know it's you. I haven't had my account frozen since, but the threat looms constantly and I'm seriously considering switching to a real merchant account/cc gateway setup instead of using Paypal.

EDIT: Re. chargebacks/returns: I sell subscriptions to my apps so no physical goods are exchanged. Over the course of my ~3 years in business maybe 3 or 4 people have requested a chargeback via Paypal (had they asked me directly I would have been happy to oblige but they went straight to a Paypal dispute). In every case, Paypal has sided with me, with almost no action on my part required. That is I get an email saying a disupte has been filed and PP will contact me if they need more info from me. A few hours later I get another email saying the disupte has been resolved in my favor. This has happened every time.

From what I hear, this is not the usual for Paypal. Maybe the low number of chargebacks and high transaction volume gives points in my favor. But everyone else says virtual goods via Paypal are just asking to be hit with chargebacks, so caveat emptor.

To clarify: this should prevent your Paypal account from being locked as they not only see that your IP is in the US, but that it's the same every time.

I bought toys for my 1-year-old's Christmas and they were delivered stinking of smoke. The ad clearly said - "smoke free." When I complained to eBay they simply would not help (one person did at first and then flipped to the party line).

eBay will never get my business again as a consumer or as someone that uses payment mechanisms for business. Their DNA is defective.

You sound like you're at the critical mass where you should be able to use a payment gateway. You should offer both as a mechanism, then if paypal tosses you out, you're set.

They're all firearm enthusiasts and members of the NRA, probably how they all met. There's a guy named Ulysses S. Grant. One of them is a hedge fund manager, orthopedic surgeon and conducts clinical trials.

They also all seem to be affiliated with calguns.net, "The California Firearms Owner's Home On The Internet". That forum even has a board devoted to GPal, which is filled with support tickets from people asking for their money: http://www.calguns.net/calgunforum/forumdisplay.php?s=efe632...

They permanently froze my account after I refunded everyone and refused to talk to me when I called. I wasn't able to get a merchant account and I lost thousands of PayPal recurring subscriptions. This was the death of my first start-up.

PayPal is a scam and it's not as uncommon as you think. If you're using PayPal, your time will come. I didn't think they would do it to me either, they never bothered me once until all of this went down.

BTW, I feel like this exact post has been posted before.

Edit: Yep, it has. See http://news.ycombinator.com/item?id=1598227

They mentioned something about not allowing "intangible products" but it was complete bullshit because they always have, always will, and still allow intangible products. This wasn't their reasoning for it but just something they vaguely mentioned once, I never did get any answers out of them.