Limited And Frozen Accounts

“Can PayPal really withhold the money in my account from me for an indefinite period of time?”

The answer is YES. PayPal can and will freeze your account, preventing you from withdrawing or utilizing your own money.  They can do this at their own discretion, and whether you are innocent or not you are powerless to prevent it.  You agree to this policing of your account when you sign up with PayPal, and if your account is ever limited or frozen PayPal is quick to remind you of this.

PayPal’s reasons for freezing or limiting an account seem respectable, at first glance.  When a problem arises between a buyer and seller, or if PayPal detects what they deem “unusual” activity regarding the account, PayPal prevents any more transactions from taking place until the situation can be investigated.  This monitoring of your account is supposed to help keep people “safe” from fraud and illegal activity. PayPal frequently puts these restrictions on accounts and demands that the account holder “verify” certain information, usually in an attempt to prove that they are a legitimate business.

Buyer Disputes

The problem with this “safety feature” for the seller comes in after the fact.  Once your account is limited or frozen, you are required to resolve the issue by providing evidence in your behalf regarding the transaction(s) or activity taking place on your account.  This process can take some time and effort, and you remain subject to PayPal throughout it’s duration.  The resolution process can (an often does) take months to complete, tying up an account holders money until he or she can prove their innocence.  This can put businesses in a particularly tough situation, restricting any further business due to the now inaccessible capital and stifling their ability to pay their vendors.

Account Verification

No emails, no warnings and no respect for your business.  PayPal will tie up the funds in your account and demand that you provide certain information about your business, and even when you do you remain subject to their schedule.  Your account can be frozen for as long as PayPal deems fit, even if you promptly provide the information requested.

Poor Customer Service

The next problem is the customer service you receive throughout the process.  When you call PayPal to find out what is going on, you certainly do not get the feeling that PayPal is looking after your interests.  My personal experience was one of being stonewalled.  I was given generic statements like “it could take up to 75 days before the funds become available again” and “When you created an account with PayPal you agreed that your money could be withheld at PayPal’s discretion”.  So I basically did not get anywhere with the representative, and by the time I hung up the phone I was feeling quite violated.  I was at PayPal’s mercy, and even though I eventually regained access to my funds it took over a month.

So if you choose to take the risk and use PayPal for your transactions given the above facts, always remember this one simple rule-

Never leave more money in the account than you are willing to have tied up by PayPal, or lose altogether

It’s really that simple.