If you MUST use PayPal...PayPal Magic: Receiving PayPal Payments (Selling)

Would you ever play Russian Roulette? Probably not. PayPal is almost like this deadly game: with each transaction that you make, it could be financial life for another day, or financial death now. PayPal, as a service is arbitrary and unpredictable. However, if for whatever reasons you might have, you want to continue using PayPal (or open another PayPal account), this section is for you.

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PayPal Magic is a tutorial of tips and tricks that will help you decrease the chances of PayPal limiting or flagging your account. If you can avoid making some of the common "errors" that a lot of people make when using PayPal, you can learn to survive the Paypal trap another day!

Upgrade to a Premier or Business Account

If you have only a Personal account, you can easily upgrade it:

  1. Log into your PayPal Personal account.

  2. Click Upgrade Account.

  3. On the Upgrade Your Account screen, click Upgrade Now.

  4. On the Choose a Name to Do Business As page, choose either Premier or Business. Choosing Business allows you to enter business information, such as customer service contact information for your business, on the next screen.

When you're done, your account will immediately be capable of accepting payments funded by credit cards.

Should you change your mind, you can downgrade a Premier or Business account to a Personal account only once. If you think you might want to use a Personal account after upgrading, it's best to open a separate account.

Setting Your Payment Preferences

Before using your account, you might want to take a moment to review your Payment Receiving Preferences. You can set your PayPal account to accept or reject payments based on your business needs.

Here's how to access these settings:

  1. Log into your PayPal Premier or Business account.

  2. Click the My Account tab, and then click the Profile subtab.

  3. Click the Payment Receiving Preferences tab under the Selling Preferences heading.

Here you can make your choices about whether to accept payments:

From unconfirmed addresses

You might choose to accept, block, or decide on a case-by-case basis whether to accept payments from members without confirmed addresses. If you intend to accept payment only for goods covered by the Seller Protection Policy, this is a good option.

In a foreign currency

You can block payments in currencies you do not currently hold, automatically convert them to your primary currency, or decide on a case-by-case basis. You might not want to automatically accept payments in foreign currencies if you might want your customers, rather than yourself, to pay the fee for converting money from one currency to another.

For example, suppose you are a U.S. account holder and a customer wants to pay you in pounds sterling. The newspaper reports the current exchange rate as 1.8 USD to 1 GBP, which prompts you to sell $18 worth of coffee for £10. You now have a balance of £10 in your PayPal account. When you withdraw that money from your PayPal account to your U.S. bank account, you need to convert the money to dollars. PayPal will do this for you, but you won't get the exchange rate listed in the newspaper. You will get a rate, determined by PayPal, that might be considered a retail rate; for example, you might see your £10 converted into only $17.

If you choose the Ask Me option for either the "From unconfirmed addresses" or "In a foreign currency" settings, you will get an email from PayPal each time you receive such a payment, allowing you to accept or deny the payment. This allows you to choose on a case-by-case basis or simply gives you the time to learn more about the buyer before you accept the payment.

From non-U.S. account holders

You might want to avoid the cross-border fee by refusing payments from non-U.S. accounts (this fee applies to U.S. PayPal accounts only).

The cross-border payment fee, assessed on payments made to Business and Premier accounts receiving a payment from someone in a different country, is an additional 1% for payments in U.S. dollars and .5% for payments in Canadian dollars, euros, pounds sterling, and yen. (This cross-border fee is waived for Canadian sellers receiving payments from U.S. buyers.)

Another reason to restrict foreign payments is that most non-U.S. PayPal members cannot confirm their addresses, which means that payments from these customers will not be covered by PayPal's Seller Protection Policy.

Made from the Pay Anyone subtab of the Send Money tab

This option forestalls payments made directly from your customers' PayPal accounts, allowing you to require that all payments you receive come through, say, your online shop or directly through eBay checkout. This can be useful if, for instance, you need special information from the customer to accompany each order.

Fill in the Alternate Payment URL if you want customers who try to pay through the PayPal interface redirected to your web site.

Funded by a credit card when the sender has a bank account

You can force customers who have a bank account attached to their PayPal account to use it when paying you. This discourages customers from paying with credit cards unless it's their only choice. Doing so might reduce the risk of chargebacks, a possible problem when accepting payments funded by credit cards.

Funded by an eCheck for Website and Smart Logo payments

Instant Transfer payments are instant payments funded with a bank account; they appear in your PayPal account immediately. However, processing payments through the banking system usually takes three to four business days, and PayPal can't be assured of receiving the money until the bank transfer is complete. Because PayPal is opening itself up to some risk with this policy, PayPal allows a buyer to send an Instant Transfer payment only if the sender's account has a backup funding source, such as a valid credit card or second bank account.

An eCheck is also an electronic bank transfer, but it requires no backup funding source and is therefore not credited instantly to your account. Instead, during the waiting period of three to four business days, the payment is listed in your PayPal account as Pending. The payment will not be credited to your PayPal balance (achieving a status of Completed) until the buyer's funds have been transferred to PayPal.

If you receive an eCheck and the buyer's bank account lacks sufficient funds for the transaction or has been closed, the transaction might never be completed and you might never receive those funds. For this reason, you should never ship your product until an eCheck payment has cleared and its status is listed as Completed.

If you would prefer to receive only payments that will be completed immediately, you might want to block eChecks. This setting applies to payments sent through your web site, such as with Buy Now buttons, as well as Smart Logo payments, such as those sent through eBay checkout. Customers will still be able to send eChecks through the PayPal interface, unless you also check the "Made from the Pay Anyone subtab of the Send Money tab" setting.

Identification to Customers

Building a relationship with your customers translates into satisfied buyers who return to your site (or eBay auctions) again and again. A basic step in building a relationship is establishing your identity; your customers need to know who you are and what you are about. Here are some ways PayPal can help you establish your identity:

Requesting Money the PayPal Way

Use PayPal's Request Money feature to ask someone for a payment, whether you need to invoice a customer or collect money from a friend.

Anyone who goes to lunch with friends regularly knows the uncomfortable feeling of not having enough cash to cover your portion of the meal. One solution is to offer to pay for everyone with a credit card and then ask the others for cash to cover their portions. This works out well, because the card holder doesn't have to borrow money and it saves a trip to the bank.

But what if there are two or even three of you with the same cash flow problem? Then it becomes tricky. That's when you can say, "I'll pay with my credit card and the rest of you can PayPal me." This way, no one has to worry about having the right amount of cash. The only problem is having to remember to send the money requests, but PayPal makes this easy.

When requesting money from friends, use your Personal PayPal account to avoid paying the associated fees. If the payment is optional, send the request via email so that the request doesn't show up in your PayPal history.

Use these steps to request money from anyone with an email address:

  • Log into your PayPal account, and click the Request Money tab.

  • Enter a subject and a note (both are optional).

The subject is more important than the note, because it is used as the subject for the email your recipient gets. The note, however, is less likely to be seen, because it appears buried within the email. If you need to include important details, it is best to send them in a separate email.

Next, for the payment type, select goods (other), Service, or Quasi Cash. You can also select eBay items or auction goods (non-eBay) if you want to bill someone for an auction.

Click Continue to view the confirmation page. Double check the email address to make sure you have the correct email address.

Click Request Money.

PayPal generates a payment transaction record in its database and sends a custom email (shown in Figure 3-2) with a link that will enable the recipient to pay the amount requested.

Requesting Money from Multiple People

Sending single money requests to several people can be repetitive and time-consuming; not only do you have to enter the email address, amount, currency, and payment type for each person, you might also need to personalize each request.

To make this process easier, PayPal provides a feature called Request Money—Group, which lets you request money from multiple people all at once. This is most useful when you are requesting money from people for a specific occasion, such as a group lunch or group movie tickets, wherein the email subject and note are the same. The Request Money—Group feature also lets you specify additional details, such as an event name, event date, and a different amount, if necessary, for each person on your list.

To use Request Money—Group, follow these steps:

If you've requested money from any of these people previously, their email addresses might already be listed in the drop-down listbox. If so, you can save time by selecting the applicable recipients from the list (one by one) and inserting them into the email address field instead of having to type them all in.

Keep in mind that everyone gets the same message, so make the details (event name, event date, subject, and note) appropriate for everyone.

Each recipient in your group will receive an email requesting payment, complete with all the information you've entered here. You can confirm that each individual email has been sent by clicking the Overview tab.

Sending Custom Requests to Multiple Recipients

While the Request Money—Group feature can make multiple requests easier, it allows for only a single note and email subject for all recipients. To send a custom note to each person from whom you are requesting money, you'll need to send separate requests. Here's a way to make this process easier:

  1. Use the Request Money feature as described in the beginning of this hack. After sending the first Money Request, you'll find yourself on the Money Request Sent page.

  2. Click your web browser's Back button to return to the Request Money—Confirm page.

  3. Click the edit button to modify the details of the previous money request. Replace the email address, make any other changes, and click the Continue button to send another request.

If you're using Microsoft's Internet Explorer, you will see a "Warning: Page has Expired" message. Click Refresh, and you'll see a Retry/Cancel dialog box that reads, "This page cannot be refreshed without resending the information...". Click Retry to continue.

If you're using Netscape/Mozilla, you'll see an OK/Cancel dialog box that reads, "The page you are trying to view contains POSTDATA that has expired from cache...". Click OK to continue.

For security reasons, PayPal has a five-minute timeout, which means that if you wait more than five minutes before viewing another page at PayPal, you'll be required to log in again. If this happens while you are sending multiple money requests, you'll lose the data from the last money request.

Customize How You Request Money

Generate your own PayPal payment links for use in email or your web site, and get a little more flexibility in how to ask people for payments. There are more ways available than using the Request Money feature.

Using Request Money is a useful technique if you're sending invoices to customers for items already sold or services already rendered, especially when PayPal is the likely form of payment. (For example, an eBay seller who accepts PayPal might use Request Money to send a payment request to a customer who has just won an auction.)

However, Request Money isn't a good idea when you're uncertain whether a payment will take place at all. For example, recipients might find it presumptive and uncomfortable if a fundraising volunteer used Request Money to send donation requests. Likewise, it would be inappropriate to use Request Money to send a customer a product brochure or other advertising. Instead, use a more passive payment link.

The simplest way to ask for money is to send a PayPal payment link with the payment details inside, but without registering the request at the PayPal site. When the recipient sees the link, he can click it and be whisked to http://www.paypal.com to make the payment, or he can simply delete the email and be rid of it.

Creating a Request URL

Here's an example of a request URL to pay $10.00 for a baseball jersey, where me@mysite.com is your PayPal email address and the account into which the payment will be deposited:

http://paypal.com/xclick/business=me@mysite.com&amount=10.00& item_name=baseball_jersey

Sending a link like this, along with some instructions, is easy to do and can be used almost anywhere, such as in an email message body:

Here is your last chance to get your own Cubs 2003 pennant race jerseys. On sale while supplies last:

Cubs 2003 Jersey Size Small: http://paypal.com/xclick/business=me@mysite.com &amount=10.00&item_name=smalljersey

Cubs 2003 Jersey Size Medium:

http://paypal.com/xclick/business=me@mysite.com&amount=10.00 &item_name=mediumjersey

Cubs 2003 Jersey Size Large:

http://paypal.com/xclick/business=me@mysite.com &amount=10.00&item_name=largejersey

Choosing the Best Approach

So, between requesting money the PayPal way and requesting money via email, which is the best way to request money?

Here are the benefits of using PayPal's Request Money feature over sending custom payment requests:

And here are the benefits of creating your own PayPal payment links over using the Request Money feature:

Probably the most compelling difference between these two methods involves the record keeping. Unless you want PayPal to record your money requests, you'll probably want to create your own custom payment links. In the end, you might want to use both methods, either in unison or individually on a case-by-case basis.

Requesting Money Without an Account

Send a PayPal payment request without having to create a PayPal account, and send payment requests on behalf of other PayPal users.

Collecting small debts can be tricky, and most of us aren't good at it. It's easy to sound petty when asking for small amounts of money, so many people often don't. And borrowers often forget to pay. But if the subject comes up, it can be an awkward moment as the two individuals try to decide what's worse, being petty or being a deadbeat. Then there's the issue of exact change. If you remind them of the debt and they don't have enough money on hand, it means you have to go through the uncomfortable scenario all over again.

No one wants to be a debt collector, so wouldn't it be great if there were a service that would ask for money on your behalf? PayPal's Request Money feature will send an email to someone and politely request money on your behalf. Asking for money via email is a great way to get paid, because it allows you to make your request without requiring them to respond immediately. Offering PayPal as the payment method is even better, because others don't have to pay you in person and can make their payment for the exact amount they owe, using whatever means is most convenient (PayPal balance, credit card, electronic bank transfer, etc.).

However, to use Request Money you must have and log into your PayPal account. Or must you? Few people know that you can create your own payment request by adding a special link in your own email. And you don't even have to have a PayPal account.

To request money without using the PayPal web site, open any email program and start a new message.

Type this URL somewhere in the body of your email:


Add the email address to which the money should be sent (e.g., your email address):


You'll probably want to specify an amount by adding the optional amount parameter, like this, where 17.00 is the dollar amount you'd like the recipient to send you:


Finally, add text to your email, explaining why you are asking for money, and include a note that makes PayPal sound like the greatest thing since sliced bread (be careful not to sound like a spammer, however):

Hi Joe, Thought I'd send you a friendly reminder to pay me the $17 you owe me for that book I picked up for you last week. If you'd like, you can pay me via PayPal by clicking this link and following the instructions:

http://www.paypal.com/xclick/business =yourname@yourISP.com&amount=17.00

When you're done, send the email!

When the recipient opens your message, he will read your note and (hopefully) click the PayPal link. Most people will be thankful that you have offered them an easy way to pay, or at the very least, you'll know that they know that you haven't forgotten.

Getting Your Money

Retrieve the money in your PayPal account with an electronic bank account transfer or other means.

PayPal makes sending money a cinch. But getting your money out of PayPal is also pretty easy. You might have money in your PayPal account if anyone has sent you cash or a payment for an item you sold on eBay or your own web site. Money is also deposited to your account when you receive a refund for a payment you made with a PayPal balance, when you transfer funds from your bank account into PayPal, or when you receive a bonus for referring a new user to PayPal.

Your balance (or balances, if you have multiple currencies) is always displayed prominently, under the My Account tab, whenever you log into PayPal. Click Withdraw to reveal the range of money retrieval options at your disposal.

Withdraw Without Withdrawing

Of course, you can always use the money in your PayPal account to fund a payment to someone else, such as to pay for an item you won on eBay or to shop at an online store. In fact, your PayPal balance will be the default funding source the next time you send money.

This is popular among eBay users who do a lot of both buying and selling, yet don't want their checking account or credit card statements cluttered with lots of transactions. In fact, some of the best-selling items on eBay are seller supplies such as boxes and bubble wrap! You can send and receive all the payments you want (subject to PayPal limits), instantaneously and without clutter.

Be careful when using PayPal funds to pay for high-risk purchases on eBay, because you won't have the extra purchase protection afforded by other means.

Transfer to a Bank Account

Certainly, a common means of retrieving money from PayPal is to withdraw it to a bank account. Once you've registered a bank account with PayPal, you'll be able to ask PayPal to transfer your funds to the bank account.

First, you'll need to attach a bank account to your PayPal account, if you haven't done so already.

Once you've registered a bank account, you can immediately request a withdrawal to it. Click the My Account tab, and then click Withdraw to display the Withdraw Funds by Electronic Transfer page.

Your current balance is shown at the center of the page; immediately underneath, type the amount you'd like to withdraw. Choose the bank account to which the funds should be sent, and click Continue.

Your account will be subject to a withdrawal limit of $500 per month until you do at least two of the following three tasks [Hack #2] :

Withdrawals take a few days to show up in your bank account, a delay that can be caused by any of the following:

PayPal currently can processes bank withdrawals to accounts in the following countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Korea, Mexico, Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States.

Each transfer typically must be performed in the native currency of the country in which your PayPal account has been established. This means that you won't be able to make a withdrawal in U.S. dollars to a Canadian bank account, even if the bank account is denominated in U.S. dollars. Avoid currency conversion as much as possible, since PayPal's rates are not favorable for large amounts.

Unlike withdrawals to U.S. bank accounts (which are free), PayPal assesses a fee on withdrawals to non-U.S. accounts. For a complete listing of these fees, see https://www.paypal.com/us/cgi-bin/webscr?cmd=_display-withdrawal-fees.

Another option for sellers outside the U.S. is to use the PayPal debit card (provided that you have a U.S.-based PayPal account).


You can have PayPal transfer funds into your bank account automatically every business day using PayPal's Auto-Sweep feature.

You must contact Customer Service to activate Auto-Sweep. Thereafter, an Auto-Sweep option will appear in your Profile. Once activated, PayPal tallies your balance once each business day (usually early in the morning) and initiates a transfer for the entire amount. The transfer happens over the same ACH network as ordinary transfers and thus is subject to the same delays and limitations.

Auto-Sweep is free. Once you have it set up, it continues to operate until you log in and switch it off.

Auto-Sweep is a good option if you primarily receive payments and do little or no spending through PayPal. Plus, you'll consistently have one funds transfer per day, which might make subsequent bookkeeping easier.

PayPal also offers an automatic withdrawal option designed for large sellers who need precise reconciliation details. To find out more about this option, contact PayPal and ask about Automatic Settlement Withdrawal.

Just Send Me a Check

As a last resort, PayPal can mail U.S.-based sellers a paper check through postal mail. You won't want to do this too often, because PayPal charges $1.50 per check. The check will be made payable to the name listed on your account (or your business name if you have a Business account). Further, PayPal will mail the check only to a confirmed mailing address listed on your account, so make sure to confirm a shipping address.

PayPal can send checks only within the United States, drawn on a U.S. bank, and made out in U.S. dollars. If you are outside the U.S., you should make sure that one of the other withdrawal methods discussed in this hack works for you before you start receiving a lot of payments. Otherwise, the only thing you'll be able to do with the money is use it to fund PayPal payments to other people.

Get Paid to Use the PayPal Debit Card

The most profitable and flexible way to retrieve your PayPal balance is to use the PayPal MasterCard debit card. PayPal pays you up to 1.5% cash back (in the form of credits to your account) every time you use your card to make a purchase. The money comes from MasterCard every time you use your card, and PayPal passes these bonuses on to you when you follow certain guidelines.

The card works just like a MasterCard credit card, except that instead of getting billed each month for all your charges, the funds will come right out of your PayPal account immediately every time you make the purchase.

Since there's no delay, the PayPal debit card is the fastest way to retrieve your PayPal balance. Another option is to use the virtual Debit Bar, which allows you to use your PayPal funds at web sites that don't accept PayPal.

To be eligible for the PayPal debit card, you must meet these conditions:

To apply for the card, log into PayPal, click the My Account tab, and then click Withdraw. Click "Shop with a PayPal debit card" and then click Continue. The next page displays your name and confirmed address, as listed with the aforementioned credit card. Double-check your information here, check the box to indicate that you have read and agree to the user agreement, and click Submit when you're done. PayPal then processes your application and sends you a physical card in the mail.

Now, to get cash back from PayPal when you make debit card purchases, you have to become PayPal Preferred. To qualify, you must be an eBay seller and agree to choose only PayPal when specifying the payment methods in eBay's Sell Your Item form. You can still accept checks and money orders, and you can even mention other online payment services in your end-of-listing email to buyers, but you need to advertise PayPal exclusively in your actual eBay listing. To get started, click PayPal Preferred in the Enhance Account box to the left of your Account Overview page.

The PayPal debit card can also be used like an ATM card to withdraw money at automated cash machines that display the Cirrus or MasterCard logo; this covers most ATMs, including many outside the U.S. However, you won't earn any cash back when you use the ATM card to make cash withdrawals. And since PayPal charges $1.00 for each ATM withdrawal (regardless of the amount), it's best to make cash withdrawals only in emergencies.

PayPal sets a daily limit on debit card usage. The limit typically falls between $1,000 to $3,000 per day for debit purchases and $300 to $400 per day for ATM withdrawals. You can view your limits by logging into PayPal and selecting View Limits on the Overview page.

Some users have found the debit card to be a good way to transfer money to other parts of the world. While PayPal issues debit cards to U.S.-based PayPal members only, it's possible for someone outside the U.S. to make ATM withdrawals or debit card purchases.

If you already have one debit card, you will most likely be eligible to receive a second debit card, which can be used by your partner, spouse, child, or whomever you allow to access your PayPal account funds. All the same cash back credits and charge limits will apply. If eligible, PayPal will provide a Request a Second Debit Card link on your account Overview page in the What's New section.

Refunding Payments

Return payments to your customers without doubling up PayPal's fees.

No one likes to have to return a payment; the fact that keeping money is better for business isn't rocket science. Sometimes, however, refunds are unavoidable: a buyer might need to cancel an order, a seller can run low on inventory, or a purchased item might not work out as planned. Fortunately, PayPal makes refunding payments easy.

PayPal also allows you to make partial refunds. This can be handy when a dispute with your buyer is just about the item's price. If a buyer believes the condition of a used item is not as good as expected, you might offer to refund 20% of the purchase price as compensation. Your buyer will have the option to accept or decline your refund offer.

To refund a payment:

  1. Log in to your PayPal account and click History.

  2. Scroll through or search your account history and find the payment you need to refund, and click the corresponding Details link.

  3. Near the bottom of the Transaction Details page, click the Refund Payment link.

  4. On the Refund Offer page, fill in the amount of the refund you want to make, or leave the default amount to make a full refund. Fill in a note to your buyer if necessary, and then click Submit.

  5. On the Confirm Refund Offer page, check the details of the transaction and click Process Refund when you're done.

The payment will then show up in your account history with the status Refunded.

Why Not Just Make Another Payment?

PayPal lets you make and receive payments, so you might wonder why you would want to bother issuing a refund when you can simply make another payment back to the person who paid you originally.

First, if you refund a payment, the person who originally paid you will see the status of that payment as Refunded rather than Completed. This might prevent the confusion that otherwise might arise if the buyer has to reconcile the original sent payment with a separate received payment.

Second, when you refund a payment, you'll get all the PayPal seller fees back. If you refund a $10 payment, for which 59 cents in fees were incurred, your customer will get a refund of $10 and you'll get a credit to your account for 59 cents. If you were to send a separate payment for that same $10, PayPal would charge each of you the 59 cents in fees.

When working with refunds, keep this in mind:

Quick Link to Transaction Details

View the details of past purchases and sales without having to wade through the PayPal history listings.

If you buy and sell a lot with PayPal, you undoubtedly often need to look up past transactions in order to get the payment status, shipping address, customer notes, and other details, as well as issue refunds. Unfortunately, getting to the details of past transactions can be laborious, requiring that you click through three or four screens before you can search for a payment by transaction ID.

The good news is that there's a better way. PayPal provides a special URL that takes you directly to a payment's details page. You might have seen links like this in confirmation emails, where xxxxxxxxxxxxx is the transaction ID:


For example:


Click the link in the email or type it into your browser's address bar, and you'll be sent straight to the payment details for the specified transaction ID (after logging in, if necessary).

Whenever you click on a link that takes you to a PayPal page, you should make sure that https://www.paypal.com/ is then displayed in your web browser's address box (the s in https is especially important). Otherwise, you might unwittingly try to log into a spoof site—one that looks like PayPal, but exists only to divert your login information to an unauthorized third party.

Where to Get Transaction IDs

Since transaction IDs are the definitive way to reference a payment on PayPal, you'll see them in a lot of places at PayPal:

This technique works for both the sender and the recipient who are looking up the payment details by either transaction ID. It's also common for the other person involved in a payment to reference the transaction ID when emailing or calling you to inquire about an order.

One thing to watch out for is that PayPal assigns a different transaction ID to the sender and recipient of a transaction. This can sometimes be confusing when, for example, you look up a transaction using an ID given to you by the payment sender and you see a different transaction ID on the Payment Details page.

You will, of course, not be able to see the details for a payment that you weren't involved in!

Making a Web Interface

Once you have the transaction ID or a list of IDs, you can write a script to output a list of links that you (or your customers) can use to easily get to the transaction details page for each payment:

html> <body> <a href="https://www.paypal.com/vst/id=4WC420852U475861R">4WC420852U475861R</a> <a href="https://www.paypal.com/vst/id=93H8WR41HAV710IU9">93H8WR41HAV710IU9</a> </body> </html>

Or, create a simple web-based tool that includes an ID field and a Submit button, allowing you to look up a single transaction without having to remember the aforementioned URL:


<form action="https://www.paypal.com/cgi-bin/webscr">

<input type="hidden" name="cmd" value="_vst">

Transaction ID: <input type="text" name="id" value="">

<input type="submit" value="Get Details">



Lowering Your Seller Fees

Here are five ways to lower the commissions PayPal charges you when you receive money.

Many sellers using PayPal don't sell enough to really care about an extra 0.7% transaction fee. For them, the convenience of PayPal is enough. With no startup fees, no monthly fees, and no long-term commitment, PayPal is a no-brainer. However, when you start doing $5,000 per month in sales, those fees start to add up. Many merchants don't realize there are extra steps they can take to reduce or offset their transaction fees.

Apply for the Merchant Rate

The standard rate (known as the discount rate by credit card merchants) for accepting a payment with a PayPal Premier or Business account is 2.9% plus $0.30 per transaction. (This rate applies to transactions between U.S. accounts; fees vary for oversees or international transactions.) You can reduce your rate to 2.5%, 2.2%, or even 1.9% (plus US$0.30 per transaction) by qualifying for the PayPal merchant rate.

Tiered structure for the PayPal merchant rate (in USD)




2.9% + $0.30


2.5% + $0.30


2.2% + $0.30


1.9% + $0.30

The rates listed above apply to payments from U.S. buyers. Payments from non-U.S. buyers are assessed an additional 1%.

To qualify for the lower rates, you must have a Premier or Business account in good standing that has been open for at least 90 days and you must have received at least $3,000 in payments in a single calendar month. (Note that these criteria apply to U.S. account holders only; international accounts might need to meet other requirements.)

To apply, follow these steps:

  1. Log in to your PayPal Premier or Business account (if you're still using a Personal Account, refer to the introduction to this chapter for upgrade details).

  2. Click Fees at the bottom of the page.

  3. On the Receive Funds row, click the rate link in the Premier/Business Account column (for U.S. sellers, this link reads "1.9% + $0.30 USD to 2.9% + $0.30 USD"). Click Merchant Rate at the top of the next page, and then click Apply Now on the page that appears.

  4. Fill out the Merchant Rate Application.

Click Submit and then you are done.

The confirmation screen will tell you if your request was accepted, denied, or queued for review. If all goes well, the new, lower rate should go into effect immediately!

Receiving fees are determined at the beginning of every month, based on your receiving volume in the previous calendar month. Once you complete the aforementioned one-time merchant rate application, PayPal automatically assigns the appropriate rate for each month.

Ask for eChecks

There is a maximum fee of US$5.00 for each eCheck payment you receive. To put this in perspective, the standard fee to accept a US$1,000 payment funded by a credit card is $29.30, nearly six times the measly $5 fee for a $1,000 eCheck. If you use eChecks for all your large payments, you will enjoy significant savings. See the beginning of this section for more information on eChecks.

Receive Money into Your Personal Account

If you hold both a Personal and a Premier or Business account, you can ask any customers who prefer to make payments funded by their bank account or PayPal balance to send payments to your Personal PayPal account. Receiving a payment into your Personal account incurs no fee, but you won't be able to accept payments funded by credit cards.

Personal accounts are also limited to receiving US$1,000 (or the equivalent in other currencies) per month. This limit is reset each month on the anniversary of the account's opening. To view your Personal account's limit:

  1. Log into your PayPal account.

  2. Click the My Account tab, and then click the Overview subtab.

  3. Click View Limits.

Enroll in the PayPal Money Market

The PayPal Money Market Fund allows you to earn returns on your PayPal balance by turning your PayPal account into an investment from which you can earn dividends. To enroll in the PayPal Money Market, click the Money Market link in the Enhance Account section of your account overview page and follow the directions.

At the time of this writing, the current yield is 5.04%. There is no limit on withdrawals and no minimum investment.

Be advised that rates of return fluctuate and enrolling in any money market account carries risk. The money market account is not insured and might lose value. Read the prospectus carefully (it is available on the PayPal site) and consider consulting a qualified financial advisor.

Use the PayPal ATM/Debit Card

PayPal pays you a 1.5% cash-back bonus for every purchase made with the PayPal ATM/debit card when you use it as a MasterCard. The bonus does not apply to ATM withdrawals or point-of-sale purchases when you use your ATM card PIN. To take advantage of this offer, you need to have a Business or Premier account, add a credit card, and add (and confirm) a bank account.

If you use your PayPal debit card to pay your eBay seller fees, you'll effectively lower your eBay fees by 1.5%!

Let Your Customers Pay

Naturally, if your customers pay your seller fees for you, you won't pay any fees at all. Among other things, a buyer can use PayPal's Mass Pay feature to not only cover the seller's fees, but to do so at only 2% (as opposed to the 2.9% plus $.30 normally charged).

Protecting Yourself From Buyer Fraud

Use PayPal's Seller Protection Policy to ensure that you don't lose money to fraudulent payments.

Whether you use PayPal as a buyer or a seller, you need to be on the lookout for fraud. If you don't take the proper steps to protect yourself, PayPal might need to retract a payment from your account, even after you've filled the customer's order.

For instance, a credit card holder can dispute any credit card payment, even after you've received the payment and delivered the goods or service the customer agreed to buy. This is the customer's right and it can be an effective means of buyer protection, but dishonest buyers can also abuse this service to intimidate or cheat honest sellers.

Furthermore, a person using a PayPal account to pay you might have hijacked the account from its rightful owner, or someone might have funded a PayPal payment with a stolen credit card. Either way, the rightful owner will, understandably, dispute any such charges once she has discovered them.

PayPal's Seller Protection Policy can mitigate the risk, often to the point of allowing you to keep disputed funds, but the best way to avoid fraud is to spot it going in. Here are some ways to minimize your risk as a seller.

Qualifying for Seller Protection

If you are a U.S. or Canadian seller dealing with U.S. buyers or a UK seller transacting with UK or U.S. buyers, you might qualify for PayPal's Seller Protection Policy, which covers up to $5,000 per year of reversals. To qualify, you must do all of the following:

If you follow these guidelines diligently, you might be able to avoid losses to buyer fraud completely.

Possibly the best indicator of a buyer's reputability is his accounts Status. Holders of verified [Hack #2] accounts have shown PayPal that they are in fact in control of the email addresses on file with PayPal and have legitimate bank accounts. PayPal trusts these members more than unverified account holders, so it makes sense for you to trust them as well.

Your prospective buyer's account creation date tells you how long the buyer has been a PayPal member. Buyers using relatively new PayPal accounts or accounts with low reputation numbers have a short track record as PayPal members, but this doesn't mean they can't be trusted. However, you might want to avoid doing business with buyers until they become better established. A long-standing account is less likely to have been set up with the commission of fraud in mind. On the other hand, accounts of any age can, and sometimes are, hijacked by phishers and crackers.


Conducting a Little Reconnaissance

Here are some tips to help you decide whether to do business with any particular person:

If you're at all suspicious, take it one step further and look for any recent purchasing activity that appears out of the ordinary (such as numerous high-value items). At the eBay site, go to SearchBy Bidder, type the customer's user ID, indicate that you want to include completed items, and click Search.

Consider the buyer's reputation. In addition to the user status information provided by PayPal, do you have other sources you can use to gather information? If you're conducting business via eBay or another auction site, check your buyer's feedback rating or community reputation. Also, look for a history of fraud or payment disputes in the recent comments from other sellers.

Contact the buyer. For any item, especially one that is expensive and easily resold, it makes sense to contact the buyer directly. Email to confirm purchase details or on the premise of confirming that the product will really suit the buyer's needs. Be particularly wary if the buyer takes little interest in your questions. Some social engineering and a nose for fraud can save major headaches.

Use common sense. If you sell only Beanie Babies, ball bearings, and body oil on your eCommerce web site and a single buyer suddenly orders ten boxes, bushels, and bottles of each, ask a few questions before shipping.

In the end, you will probably choose to do business with most of the customers you encounter. But a little common sense and awareness can protect you from most types of fraud.


Protecting Yourself From Chargebacks

Reduce or eliminate the risk of having disputed payments reversed from your PayPal account.

A chargeback is the result of a credit card charge being rejected by the credit card holder, typically in cases where the credit card was stolen and used fraudulently. But such charges can also be disputed by customers who feel that they've been defrauded by sellers.

If you accept credit cards, in person or through PayPal, you might encounter a chargeback from a buyer, just as a seller accepting personal checks might receive an occasional bad check. Chargebacks are an unfortunate but realistic cost of doing business, so most sellers factor this cost into their business plans.

When a customer initiates a chargeback with his or her credit card company, PayPal may deduct the amount of the transaction from your account if you're not covered under PayPal's Seller Protection Policy. All sellers who accept credit card payments run this risk and might be liable for chargebacks.

Even if you have a low-volume online business, you cannot avoid the risk of chargebacks. According to a study by the Gartner Group, approximately 1.1% of online transactions are estimated to result in fraudulent buyer chargebacks. That's like paying an extra 1.1% fee for each and every transaction! Of course, chargeback risk varies a good deal depending on the type of goods you sell, but nearly everyone who accepts credit card payments faces some chargeback risk.

Of course, none of this applies to non-credit card transactions, such as payments funded by a bank account transfer or PayPal balance.

Protecting Yourself

Whereas most merchant account providers and payment companies simply pass all of the chargeback risks and associated fees and liabilities on to sellers, PayPal is different. As long as you follow PayPal's guidelines (the Seller Protection Policy outlines these guidelines), PayPal helps protect you against fraudulent chargebacks.

Be sure to familiarize yourself with this policy; click the User Agreement link on the bottom of any page on the PayPal web site, and then click Seller Protection Policy. When you follow the policy's guidelines strictly, PayPal protects you from chargeback liability on all qualified transactions. In addition, PayPal takes chargeback claims seriously and, when appropriate, investigates and vigorously contests chargebacks on your behalf.

PayPal is able to guarantee protection against reversal of funds only if a chargeback occurs for nonreceipt of the product or in the event of an unauthorized charge (resulting from a stolen credit card or account takeover). Even then, you're entitled to this protection only if you have followed the terms of the Seller Protection Policy.

Here are some best practices you should follow to prevent chargebacks from occurring:

  • Make sure the item you're selling is described (on your site or in your eBay listing) in as much detail and as accurately as possible. You should not assume that simply providing a picture in your listing will sufficiently answer any quality questions that your customers might have. Avoid merely stating that the merchandise is being sold "as-is." This won't protect you as much as you might expect. A detailed item description will help your defense in the event that a buyer claims that your item was not as described.

  • Get to know your customers. Although selling in an online environment doesn't make it easy to build a face-to-face rapport, it doesn't have to keep you from learning about your customers. While the volume of your business might prevent you from contacting all your buyers, you should make every effort to respond to any customer inquiries regarding the transaction or the purchased items, both before and after the transaction. Plus, this practice will help get you more repeat customers.

  • Keep any and all records and correspondence with your customers. This allows you to provide further evidence that you adequately described the item to the customer or responded to the customer's inquiries.

  • Take some time to review the online resources listed at the PayPal web site. Click Security Center at the bottom of any page for further help. For more tips on how to avoid fraudulent transactions.

Shipping Products

When a customer disputes a transaction (e.g., files a chargeback) with her credit card company for an unauthorized charge or undelivered item, the first item of information the credit card company will expect from PayPal (and you) when disputing the chargeback is proof that the customer received the merchandise.

Providing verifiable proof that the customer received the item in question does not mean simply being able to prove that you shipped the merchandise. You must also prove that the package was delivered and, if applicable, signed for. To that end, you should always use a shipping service that provides some type of online package tracking.

To further protect yourself, make a habit of requiring a signature for delivery, a feature required for items worth US$250 (or the equivalent in the currency of the transaction) or more. Checking the box on the shipping form that indicates that a signature must be obtained overrides any waiver of signature that the customer might have on file with that shipping company.

Use the PayPal Shipping Tool by clicking the Ship button in your transaction history.

This way, your customer's shipping information is automatically inserted into the shipping label (saving you time), and the resulting shipment tracking information is automatically stored along with the transaction details (streamlining any subsequent chargeback defense),

If you don't use the PayPal Shipping Tool, you can still provide PayPal (and your customers) with your tracking information. Just open the transaction in your account history and click the Add button next to Shipment Tracking Information. Among other things, this feature will also eliminate a large portion of customer complaints and possible disputes filed prematurely by impatient or otherwise confused customers for nondelivery of items.

For eBay auctions, use PayPal's Post Sale Manager (located under the Auction Tools tab of your account) to help manage shipments.

Responding When You Receive a Chargeback

Unfortunately, no matter what steps you take during the transaction process, you still might receive a chargeback. Whether it is due to nonreceipt of an item, an item not as described, or a transaction that was reported as unauthorized, it can happen to you.

The first step when you receive a chargeback notification is to make sure that you respond with accurate information and do so within the requested timeframe. This allows PayPal to effectively dispute the chargeback case on your behalf. Keeping good records of transactions and shipment of goods and communications, as described earlier in this section, will make this an easy task.

Keep in mind that the rules governing a chargeback resolution are not the same as policies for PayPal's buyer-protection process. Credit card companies provide their customers with different timeframes in which to dispute transactions (and thus initiate chargebacks), and each card association (Visa, MasterCard, American Express, Discover, etc.) has different chargeback processing rules.

When a chargeback is first received, PayPal places a temporary hold on the associated funds in your account until PayPal is able to investigate the transaction and determine whether you're covered under the Seller Protection Policy. This does not mean your PayPal account will be debited; rather, it means the funds are, in essence, frozen and that a reversal is pending, which means that you cannot withdraw or otherwise use those funds. Upon review of your case (which can take up to 30 days), either of the following can happen:

As soon as PayPal notifies you of a chargeback, open the Transaction Disputes page by logging into your PayPal account and clicking the Resolution Center tab (or by going to https://www.paypal.com/SRVCTR). Next, select Open Disputes to go to the transaction in question, and click the Resolve button in the action column. Read the status details of the complaint and click the Resolve Chargeback Now button. At this point, you'll have three options:

Click Continue and follow the instructions provided.

Providing Additional Information About Your Case

PayPal welcomes any additional information that might aid the dispute process; the information that might be helpful depends on the type of chargeback you're fighting

Nonreceipt of merchandise

The information that PayPal needs to successfully dispute this type of chargeback is proof of delivery to the buyer's confirmed address. In most cases, this proof will be in the form of a tracking number that can be entered into your courier's web site. (You did use a courier with online tracking, right?) Many larger couriers also provide a copy of the recipient's signature online, evidence that can you use to prove that your customer actually received the product in question.

Unauthorized credit card transaction

If you can provide proof of delivery of the item to the customer's confirmed address, plus any records of correspondence, PayPal will have a higher chance of successfully disputing the chargeback. In short, do your best to prove that the transaction was indeed legitimate and not "unauthorized" as the customer might be contending.

Merchandise not as described (quality of merchandise disputes)

PayPal needs any description or details of the merchandise in question. If you sent a replacement item for the original item being disputed, you should provide tracking for that replacement item. If you already provided a refund for the disputed transaction, you should provide proof of the refund. If the original merchandise has been returned to you from the customer, provide the details regarding that return.

Duplicate processing

If the customer has indicated that he was charged twice for the same transaction, you'll need to provide a separate tracking number for each transaction or item, such that you can correlate each charge with a distinct, tangible product that you've shipped. Or, if the second PayPal transaction ID number is indeed a duplicate transaction, you'll need to provide proof that you have refunded the duplicate transaction.

If, at any time, you discover additional information pertinent to an open case, you should send it through PayPal's secure web server. Simply log in to the PayPal web site, click Contact Us at the bottom of any PayPal page, and then click Contact Customer Service. When completing the Ask Your Question web form, make sure to include the chargeback case ID number (e.g., PP-xxx-xxx-xxx) in the subject line of the Transaction Disputes page. This allows PayPal's Chargeback Department to quickly associate the response with the appropriate case. If you are unable to provide all of the information you have through the PayPal web site, you can send an email to chargeback-response@paypal.com. Again, be sure to include the PayPal chargeback case ID in the subject line.

Timing and Chargebacks

Because chargebacks usually happen in response to a claim or discovery that occurs well after the initial transaction, it can be weeks or even months before you learn that a chargeback has been initiated by the issuer (on the buyer's behalf) and that the transaction is going to be reversed.

Although there might be a delay before a chargeback is initiated, you (and PayPal) typically do not have the same luxury. PayPal is limited by the timeframe provided to PayPal by the buyer's credit card company, so they attempt to work toward the quickest possible resolution of the issue.

In general, upon initial notification of a chargeback case, you should provide all supporting documentation to assist in the chargeback dispute within three business days. Under certain circumstances during the processing of chargeback disputes, PayPal might ask for additional information from you to support the dispute. Any additional information should be supplied within the same timeframe of three business days.

When sending emails to PayPal, keep in mind that you will not be able to include attachments. However, if you need to provide additional documentation that cannot be described easily in an email, you can fax additional chargeback dispute information to PayPal's Chargeback Department at (402) 537-5755. Of course, you should always include your PayPal Case ID as a reference.

Avoiding Chargebacks on Digital Goods

Make purchases of digital goods eligible for PayPal's Seller Protection by mailing physical goods.

PayPal's Seller Protection Policy limits your exposure to fraud, provided that you follow its guidelines to the letter. The problem is that the policy applies "only to the sale of physical goods, and not to any services, intangible goods or sales or licenses of digital content." So what's a digital-goods merchant to do?

Shipping a Physical Version

The solution is to sell physical goods. Ship media, such as a CD-ROM, containing your software or e-book. You can still grant your customers immediate download privileges for the material they will be receiving on CD or floppy, but ship a physical product as well. Be sure to offer tracking of the package.

Thinking Outside the Disk

If you want to avoid the cost of a disk, mailer, and added postage every time you ship a CD, use paper instead. Encode your digital item with base64, and then print it with a small font on both sides of plain letter-sized paper. Half a megabyte of data can easily be stored on 15 pages, which should weigh no more than three ounces.

Go to http://www.fourmilab.ch/webtools/base64/ for one of many publicly available base64 encoder/decoder utilities.

Your customer can then scan the sheets with a scanner, convert them back into digital data with OCR software, and then decode the base64 code to recreate the original product. Obviously, it's unlikely that any customer will bother doing this, but since it's technically possible, your shipment will qualify for the Seller Protection Policy.

Be careful what you end up shipping. For instance, the User Agreement specifically states that "this protection applies only to the sale of physical goods, and not to any services, intangible goods or sales or licenses of digital content." This means that sending only a paper license or certificate of ownership would be insufficient for eligibility.

Handle Merchandise Disputes Effectively

Here's what to do when a buyer disputes a payment sent to you.

If you're a seller and a buyer has filed a claim against you or initiated a chargeback, you should respond online through PayPal's Resolution Center within 10 days. If you don't, you'll forfeit your defense and PayPal will refund the buyer.

First Response

When you respond, you'll be able to choose how to resolve the dispute from a menu of options, including disagreeing with the buyer's claim.

Most claims involve nonreceipt of merchandise. Nervous buyers sometimes file claims before sellers have had a chance to ship merchandise. The most effective way to respond to such a claim is to promptly provide an online tracking number for your shipment. This allows the customer (and PayPal) to confirm that the merchandise was not only shipped, but also delivered to an address attached to the buyer's PayPal account.

Never ship to a gift address, a friend's address, or any address in a country different than the one listed on the customer's PayPal account.

Without verifiable proof (e.g., a tracking number) that your package was shipped, you'll lose the dispute and forfeit the payment.

Preventive Maintenance

Overcommunicate with your buyers, especially newbies. Email them when you expect to ship, and email them again when you actually do ship (include a tracking number whenever possible). This allows your customer to check delivery status, which helps to reduce buyer anxiety about transacting with a stranger and thus reduces the likelihood that a dispute will ever be filed.

Also, be compulsive when writing your product or eBay listing descriptions. (Good descriptions often garner more buyer interest anyway.) If the item is used, say so, and exhaustively describe all wear and tear. Include actual photos you took yourself (e.g., a picture of the actual iPod you're selling rather than one you grabbed from Apple's web site).

Finally, to protect yourself against fraudulent chargebacks, ship to your customer's address as listed on the Transaction Details page, and ship only if you see that the transaction is eligible for the Seller Protection Policy.

Unfortunately, there is no way to automatically refuse payments that are ineligible for the Seller Protection Policy. Keep in mind that such transactions are not necessarily bad or risky. For instance, the buyer might simply live in a country in which some of the eligibility requirements are not available.

As a seller, you can pick and choose with whom you do business. If someone makes a payment you subsequently decide is not worth the risk, you can always issue a refund and make other arrangements.

Next Section: PayPal Payment Buttons



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