PayPal & Buying Gold Bullion Bars and Coins
Here's another way using PayPal can be dangerous: Using the PayPal service to buy your gold bullion bars, gold bullion coins, or pre-1965 gold coins. Investing or collecting anything that's made of gold (like gold bars or coins) has always been popular. It's even more popular today because the price of gold has literally gone through the roof. If you bought gold in 2003, for example, you would have paid under $400 per ounce of gold. Today, we've seen gold prices hit over $1,500 per ounce! And where there is money, there are scammers! One of the easiest ways for scammers to separate a fool and his or her money is to have you pay for that gold using the PayPal service.
Here's a great example of how this gold bullion, gold coin scam works: Let's take a legitimate metals website like http://www.silverbullionbuy.com -- at this website, they have tons of information on buying and selling silver and gold, as well as great deals on silver & gold bars and silver & gold coins. But they don't take PayPal. Why?
On the buyer side, a scammer can use PayPal to pay a company like silverbullionbuy.com. After they ship the scammers their gold, the scammers can then keep the gold and initiate a PayPal dispute. Because PayPal is terrified of chargebacks (according to PayPal's SEC filings, they must keep their chargeback rate below a certain percent or risk losing the ability to process credit card transactions), they will almost always side with the buyers. That means PayPal will debit silverbullionbuy.com's PayPal account for the amount of the transaction, return the money to the scammer's account, and the scammers get to keep the gold bars or gold coins. The seller loses EVERYTHING with PayPal involved!
How does this gold bullion or gold coin scam work from the seller's side? If your gold bullion dealer is the scammer, they can use PayPal to their advantage, too! Here's how:
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First, the gold bullion or gold coin scammer will take advantage of your belief that paying with PayPal is "safe." You'll be thinking that since this gold metals seller accepts PayPal, it must be safe to buy from this seller. That would be your first mistake. Why? Because PayPal's own Terms of Service Agreement allows scammers to get off scott free!
You buy gold bars or gold coins from a scammer. You pay using PayPal. The scammer then withdraws the money from his or her PayPal account. By the time you discover you've been scammed, the money is long gone. If you take a look at PayPal's User's Agreement, it tells you that you are not covered for your losses. The only way you'd get your money back is based on one thing: PayPal's ability to get the money from the scammer's PayPal account. In other words, PayPal WILL cover your losses if the money can be recovered from the scammer's PayPal account. If PayPal cannot recover the money, you get nothing.
Meanwhile, PayPal will send you a nice email telling you that they have ruled in your favor, BUT they will not cover your gold loss. PayPal will also tell you that IF they are able to recover the money from the scammer's PayPal account, they will do so. This never happens.
By this time, the gold or silver scammer has already packed up shop and opened another PayPal account -- ready to work the same gold coin and gold bar scam again and again.
The best way to avoid this scam as a buyer? Always pay with your credit card. With a credit card, you can always initiate a chargeback directly with your credit card issuer. In almost all cases, your credit card company will reimburse you for your loss.