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Is PayPal Safe?

Social Sonar - Wednesday, February 22, 2012

Do you accept payments on your website?  If you don't have a merchant account to accept credit cards, PayPal is a popular method for accepting payments.  PayPal claims to be a safe way to exchange money, but is it really safe?

 According to PayPal, they offer the following protection for sellers:

  • Protection from buyer claims and chargebacks
  • A convenient process for responding to disputes
  • Seller verification and buyer address confirmation

They offer the following protection for buyers:

  • $0 Liability for Eligible Unauthorized Purchases when you meet our requirements
  • Refunds for incorrect orders or items that never arrive
  • A convenient process for resolving problems

PayPal is popular with eBay users (and is actually owned by eBay).  The fees to merchants (2.2% to 3.9%) is often higher than if you have an account with Visa or Mastercard (interchange fees vary but generally average 2% in the United States). 

Although some in the tech industry will tell you that PayPal is not as secure as they advertise, the general public appears to believe it is a safe site to use.  There is one website in particular that would have you believe that PayPal is not safe at all.  According to PayPalSucks.com, PayPal is not subject to Federal regulation since they are not a bank.  They list story after story from unsatisfied PayPal customers.  However, for every bad story, you will find ten (or more) happy customers.  So, we suggest you take every unhappy customer's story with a grain of salt.  For a company that has a reported 350 million users, we know that not everyone will be happy with the service. 

In fact, many of the "issues" with PayPal have more to do with consumers being phished or having a virus on their computer.  This is not an issue caused by PayPal, but by consumers clicking on phony links.  Unfortunately, if a consumer accidentally "shares" their password with a hacker, someone could gain access to their PayPal account, and ultimately, their bank account.  For this reason, having your financial information so available on the internet can be scary. 

One of Social Sonar's employees recently had this happen.  She had a Trojan Horse virus on her computer, which allowed a hacker to gain access to her PayPal account (and ultimately her bank account).  PayPal thought the charge was fishy and immediately placed her account on limited access.  Other than losing a little bit of time on phone calls, she ultimately lost no money.

Do you accept payments on your website?  Do you use PayPal?  Tell us about your experiences with PayPal or other merchant accounts.