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At first glance, Paypal sounds like an amazing service; transfer your points/gold/dollars/XP from one account to another in a matter of seconds, making it just as easy to buy from eBay as it is to open a small online store. But there’s a dark side to Paypal which has been emerging more and more as of late.

Services like Dwolla have emerged to compete with the behemoth, offering considerably lower fees and less inconvenient ‘validation’ time periods. The negativity surrounding Paypal extends further than just its terms and conditions — the company’s choices regarding socially relevant matters have been criticized as well. Here are four reasons Paypal doesn’t deserve your money.
 

“Funds Release” Time

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PayPal has recently implemented a policy which allows them to withhold merchants’ receipts up to 20% in a ‘rolling reserve’ (to cover chargebacks and refunds) for up to three months. Small businesses were outraged, but PayPal stood their ground and stuck to their canned email responses when contacted with pleading emails. Businessweek lambasted the new policy as ‘disruptive to cash flow’ and said it could put some companies out of business.

Although Paypal claims that it notifies its sellers of the policy 30 days before implementation, many upset customers claim that they weren’t contacted by Paypal whatsoever. Companies successfully using the service for years and years.

High Rates

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The more expensive the transaction, the higher the fee charged by Paypal. There’s a 2.9% transaction fee on each sale, plus a additional $0.30 per transaction. International sales, however, pay a 3.9% fee. It sounds small, but it adds up. A sale of $500 is charged a fee of $14.80. That’s fourteen cheeseburgers, a movie ticket, a lawn chair from Target, three large Red Bulls, or two whole lunch specials from the Chinese place. Three, depending on where you live.

The fees aren’t the only bad part; the way they came about were pretty shady. PayPal created the fees, available for viewing in their ToS section and nowhere else, without notifying anyone. They snuck them onto the website and quietly began charging unsuspecting customers.

Other services have popped up, charging smaller fees or none at all. Dwolla is one, and charges $0.25 per transaction, regardless of the amount. Dwolla is also interesting because they don’t rely on credit or debit cards linking to each account; they simply hook up your bank account directly to their service. WorldPay and SagePay also offer similar services.

Deplorable Customer Service

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Paypal is notorious for responding to customer concerns with cold, indifferent canned responses. Most importantly, it’s hard to find a phone number on their website, especially if you don’t have a PayPal debit card or aren’t a pro number. The premium number is costly to use. Multiple emails asking for help are answered with the same copy and paste response.

Although every company has a few unhappy customers, googling ‘Paypal sucks’ turns up a slew of angry blog posts by people Paypal has burned. Most complaints are about unreasonably banned accounts, transactions gone wrong which end up getting ‘rectified’ at the victim’s expense, and the dreaded ‘verification’ suspension Paypal seems to randomly place on accounts belonging to legitimate small businesses.

The impersonal responses are insulting and condescending, repeating the same vague phrases in every email. Chris Rossi, for example, was permanently banned after purchasing a programming service from a vendor. When he looked into the matter, it turned out that the vendor had been banned for the sale of pornography — causing every single person he had ever received money from to be banned as well, regardless of what the sale was for. All five emails from Paypal include ‘Your account has been permanently limited. Customers who are permanently limited for violating the Acceptable Use Policy are not permitted to open new PayPal accounts” and don’t address his long list of evidence in his defense at all.

Bad Decision Making

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Paypal is, overall, bad at making decisions. Internationally recognized as less-than-the-best, the company is prone to reversing transactions, charging fees, withholding money, and canceling accounts without notice or a response afterwards.

In 2010, Paypal suddenly reversed all exchanges marked as “personal” coming in or out of India. Without notification, they screwed over hundreds of people and many businesses who were left with overdrafted accounts — not only had many vendors already withdrawn the removed money, but others were left uncompensated for services they had already completed.

During the same year, donations to Cryptome were frozen and $5300 removed. PayPal refused to explain this action.

A few months later, two other legitimate and high-traffic accounts were closed without notice or acceptable response. Finally, the Wikileaks fiasco ensued in December 2010 when Paypal permanently banned an account taking donations for WikiLeaks. A PayPal VP eventually admitted that this was the result of pressure from the US State Department.

A government puppet with little to no respect for the customer, nor how he or she is treated, doesn’t deserve your money. Even if you settle for Paypal, the other services are at least worth checking out.

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