ELECTRONIC PAYMENTS | Some time ago, PayPal had my account suspended without any prior notice. Fortunately I had no funds in deposit at the moment, that I would otherwise risk losing. Other PayPal users haven't been as lucky, however.

It came to my attention earlier today, that my previous trouble with PayPal clearly wasn't an isolated event. Under the impression that PayPal was a reputable and reliable financial service, I was honestly baffled how many PayPal users have actually had really bad experiences with this electronic payment facility. With a user agreement granting themselves the power to freeze and shut down user accounts at will, PayPal is a business making profit from funds they withhold from countless of users. With no explanation as of why, nor any room for negotiation.

Whatever the people at PayPal decide to do with your account and deposited money, it's final. Non-negotiable.

Internet profile and tech aficionado Chris Pirillo, a.k.a. lockergnome, brought up the risks of using PayPal, especially for making money, in his video submission yesterday:

Chris Pirillo giving his view on the PayPal situation of today.

As stated in the video above, PayPal can have your account suspended for 180 days at its sole discretion. Any attempt of having funds transferred to -or sent from- your account will therefore be blocked. And there is nothing you can do about it. They don't even have to give you an explanation as of why this is happening. Even worse, however, is the fact that PayPal can decide to even close your account permanently during this time of suspension.

PayPal also sending out expensive fines

As if that wasn't enough, PayPal can also charge you $2,500 for violating any of their terms and rules listed in the user agreement, regardless how mild or severe their allegations against you may be. Unless you've taken the time and effort to learn all the obscure details and carefully read all the small print in their terms of service, you may as well be the subject of getting fined for violating this agreement any day, without even realising you did anything wrong to begin with.

eBay / PayPal monopoly

eBay - world leader in Internet auctions,
and also owner of PayPal
For many people, PayPal is their primary source of income. Many businesses rely on eBay as their main sales channel on the Internet marketplace, and for that PayPal is their only practical option. Ever since eBay acquired PayPal some years ago, they've only bonded and streamlined the two services more and more tightly, and don't seem too keen on incorporating any alternatives beyond PayPal. This is of course how they make private traders and small/medium businesses entirely dependent on their services. And as soon as PayPal finds anything to complain about, or simply if they just "feel like it", they can have you and your deposits frozen for half a year. They have the power to bankrupt and take anyone out of business, literally. Over time, all this money that's kept on hold, generates profit for PayPal (and hence eBay), in the form of interest. Interest which they'll never give their lawful owners back.

My experience with PayPal

While I had my account suspended about a year ago myself (without any prior notice or warning), I luckily didn't risk losing any money. As I've used PayPal strictly for transferring payments to sellers, and never as an income, the only thing wasted was time. Time spent on setting up a new PayPal account, along with a matching e-mail account. I also had to start a new account at the online shop, as their accounts had a direct connection to the PayPal/email addresses. Then I obviously had to place a new order and make another attempt on paying.

In my case, PayPal had the decency to at least give me an explanation for suspending my account. The reason was that I historically had been adding too many credit cards. Apparently they were not familiar with my Swedish bank's secure payment service which generates a unique "virtual" debit card for each purchase, with a user defined withdrawal limit for each card number. Thus, using different card numbers for each transaction for nearly ten years of eBaying apparently made me look suspicious in the eyes of PayPal. So I tried my best to explain this to them, and eventually had my account restored, but only limited to basic functionality. I was no longer allowed to add a new debit card, so the account became rather useless, as the cards I already had were all consumed and expired.

How could they do this to us?

PayPal is not a bank, it's a corporate entity that is not controlled by the state. Therefore they make their own rules and regulations as they please. As long as they follow the law, they have no obligations to you other than what's been specifically agreed upon in the contract between you. Relying on a service like such, for a primary means of income is therefore a huge risk to be taken.

One general tip that applies even in the case of e-shopping and such, is to avoid becoming too dependant on one single company or service. If the shut down of your PayPal account would mean a shut down of your entire business, then it's probably a good time to start looking for other options.