Is Paypal Safe for Buyers and Sellers?
Paypal is a company headquartered in San Jose, California and owned by the Ebay company which also has it's main location in San Jose. Millions of people buy and sell on Ebay everyday, and many of them are left with no choice but to use Paypal as their payment option since it's pushed on some countries as their only option when using Ebay (such as in Australia), while others are forced to use it because it's become the preferred method of others worldwide. But what happens if you buy something on Ebay and the person rips you off and doesn't send the item? What type of protection do you have with Paypal and is Ebay really safe?
Paypal's main theme is protection. Ever since Ebay purchased Paypal, they began a massive campaign to promote this payment processing company in order to get people to switch over from other payment options to them. They have touted Paypal as being a company that provides security online, and would like people to believe that any transactions done through Paypal are done with relative safety. They basically want people to think of Paypal as an inpenetrable fortress that protects all who enter it. This couldn't be farther from the truth.
I was scammed by a seller on Ebay back in 2007. I purchased a headlight for my car from another seller. I lived in California and he lived in Kentucky. He had an excellent feedback score. Feedback, if you're not familiar with it already, is Ebay's system for reviewing a transaction. If a buyer is satisfied with the seller's service and received their product in good condition and quickly, they are expected to leave a positive feedback. If a seller was not happy with the buyer or was scammed by the buyer, they can leave a negative feedback. This particular seller had 200+ positive feedbacks, and no negative feedbacks. Which means that 200 people were satisfied with his service and nobody had anything negative to say about him as a seller. So I figured I was safe by purchasing an item from him. To this day, I don't know why he did it, but for some reason he never sent the headlight and continued to drag me along through emails, promising that it would be sent out or that it was on it's way. He never sent it, and I quickly found out that he had scammed others around the same time, because he began to accrue negative feedbacks within a few weeks after I bid on and won the headlight.
Paypal has a dispute system which allows you to open a dispute against a seller if they scam you or you have other problems with the seller. They usually give you a certain amount of time to file a dispute (it was something like 32 days back when I had this problem, though it may have changed by now). I filed within 20 days and they allowed me to file the claim. Eventually, Paypal sided with me and decided to compensate me for my losses. Problem was, the seller had cleared most of the funds out of their account before I ever filed a claim. So even though Paypal freezes the funds in certain accounts that may have unresolved claims, there was nothing they could do when this seller had anticipated that and cleared his account out. There was about $60 total in his account, so that's all they could award me. The headlight itself was somewhere around $180. So I lost a total of around $120, and there was nothing Paypal could do about it to help me recoop that money.
Another reason why Paypal is not safe, is because of hackers and phishing scams. This isn't really Paypal's fault, because I don't see much of a solution to it, but people should be aware of it and shouldn't put all their faith in Paypal's security. One common scenario is when a person who owns a Paypal account receives a fake email from a hacker or a phisher. They may think it's an email from Paypal or Ebay, and will disclose their account information in the email. The scammer on the other end of the email now has their login details, and can login to this person's account without them even realizing it. The scammer will then purchase things with the other person's account, and have them shipped to fake addresses so it can't be tracked back to them. After the sellers receives the money and ships the items to the fake address, the funds they received may be reversed, once Paypal realizes that the items were purchased without the account owner knowing. So the person who really gets scammed in the end is the seller, because Paypal does not compensate them for the lost item. Many sellers have scammed this way and have lots thousands of items by shipping them to unverified addresses. So whether you're a buyer or a seller, you should always be careful when dealing with Paypal.
As far as alternatives, there are many options out there like Escrow services, Google Checkout, Western Union, and E-Gold. But many of these lack 100% security as well, and there are still many customers who prefer to go through paypal, assuming it's safer.
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