Random Thoughts – Randocity!

Paypal: Don’t trust them with your checking account!

Posted in banking, best practices, scam, scams by commorancy on April 1, 2009

Paypal has been in business for how many years now? Yet, they still can’t manage to find a way to verify a person without using a bank account? Since day 1 of Paypal, I’ve been sternly opposed to giving my checking account routing information to Paypal. Why? It’s very simple. I don’t trust them. I never have. I never will.

Why you should never give out bank account + routing information to anyone!

Let me first say that when I discuss ‘routing numbers’, this means a combination of both your account and your routing number. Clearly, you wouldn’t just give out only a routing number as that’s not useful. It is only useful when in combination with an account number.

When you give someone a signed check, you implicitly give them your routing information. That’s a danger when you write a check to a company. The protection, of course, is that you’ve given them a physical paper check for a specific amount and you know exactly how much that check was. So, when the check number arrives at the bank and drafts that amount of money from your account, it was expected. They can’t draw more than the amount the check was written.

Routing numbers, on the other hand, are effectively blank checks. When you give a company your routing number, you are handing them a signed blank check. That’s because you’ve agreed to allow them blanket access to your checking account. That company can then debit any amount of money from your account they see fit without so much as a thank you. Because Paypal uses EFT (electronic fund transfers) in the form of ACH (automatic clearing house), they can debit your account up to the maximum amount of funds in your account. This means, they can overdraw your account and completely drain your funds. ACH/EFT offers no liabilities to the consumer whether accidental or intentional. Because you gave that company explicit approval to debit your account at will, there are no liabilities for any inappropriate transactions. That’s left between you and Paypal to resolve. The bank will usually not become involved. When banks do become involved, the best they can do is tell you when it happened. You can try to ask your bank for additional help, but they will most likely point you to Paypal for resolution. The reason is simple, you agreed to give Paypal access to your account up front.

Worse, if the company that overdrafted your account chooses to not give you the money back, then you may be out of luck. At that point, you better seek a lawyer, assuming you have any money left to pay them.

Paypal and Checking Accounts

Paypal does not need a checking account to verify you. They just tell you they do because that’s the way they have always worked it. This verification process can easily be done with a credit card charge that you input later to validate that you receive the bill for the card. Paypal simply wants to have unfettered access to your checking account. Frankly, it’s a huge liability for you. It’s also a huge liability for Paypal to store this information. One hacker in their system and they could have a field day with your money.

Credit Cards and Fraud

Paypal is well aware of the fraud issues with credit cards. They are also well aware of chargebacks, merchant liabilities and fees associated with these processes. To avoid them, they prefer unlimited access to your checking account that hold no such penalties or liabilities. Because the consumer has no recourse over inadvertant transactions, Paypal has the upper hand. This is why Paypal will not verify you with only a credit card. Can they validate based on only a credit card, yes. They simply choose not to.

Credit cards have long established liability rules that prevent fraud occuring from both rip-off artists and from merchants alike. Unfortunately, there are no such rules for ACH.

Consumer Protection from Businesses

Whenever a company asks you to give them routing information from your checking account, tell them, “No!”. Not only should you tell them “no”, you should explain exactly why. Tell them that you don’t trust them with that level of access to your account.

Should you continue to do business with Paypal? That’s entirely up to you. But, I still do not have a verified account with Paypal because I simply will not give them the routing information from my checking or savings account. I simply do not trust ANY company enough with that information. Remember, Paypal is not a bank. Thus, it does not fall under any banking rules, liabilities or any federal insurance. In fact, who knows what insurance Paypal even carries? So, whatever Paypal does, you’re at their mercy to do it right. If they don’t, you have to fight with them to get your money back. The bank won’t help you.

But, I need to give out my routing number…

Here’s another option. It’s not optimal, but it works. Simply, open a second checking account. By setting up a checking account specifically and solely to be used with Paypal and merchants, you can limit your financial liability. You can then link another account to this new account for transferring in money only, but be sure NOT to link the new checking account to any overdraft protection on any other accounts. So, if Paypal overdraws your account inadvertantly, they won’t get any more money than what you have specifically placed in there. If you want to buy a $250 appliance, only transfer in $250 for just that appliance.

The problem with this technique is that banks sometime require minimums to open an account and minimums to keep it open. So, you may have to leave $1000 (or some other arbitrary amount of money) to prevent accrual of monthly fees or account closure. You’ll need to contact your bank for details.

While this does work, it’s not optimal by any stretch. It requires you to be extra cautious with how you use that account. You have to be diligent to place the money in there when you need it. And, you need to remember that transfers of money into the account are not always instanteous. So, you may have to transfer your money in the day before you intend to purchase to ensure the money is there to cover the transaction.

What if I’m a Merchant?

For merchants who want to get paid for products they sell, I understand the issue here with ACH/EFT. Again, in this instance, I would set up a separate checking or savings account solely for Paypal use. Only give this account to Paypal so that when you receive payments, you can transfer them out of that account and to your ‘regular’ account immediately. This way, if Paypal decides to debit you for any reason, the money won’t be there.

Overdrawn Accounts

If Paypal overdraws your account for any reason, don’t expect them to pay you back for insufficient fund fees. You will have to deal with these fees on top of the inappropriate debiting from Paypal. You will then have to argue with Paypal to get your money back and your bank fees reimbursed. But, good luck with both of those processes.

Spending Limits

If you choose not to give your routing information to Paypal, Paypal arbitrarily limits how much money you can send to an individual when you buy merchandise. For this silly reason alone, this is enough to tell Paypal to take a hike. There are plenty of ways to buy merchandise from merchants on the Internet. In fact, when a merchant is reputable enough, they will set up their own merchant account with a bank and let you pay the merchant directly. You should also feel comforted knowing that when you send a payment to a merchant, not through Paypal, you have the full card protections behind your transaction. When you purchase through Paypal, your Paypal account agreement may prevent you from using some of your card’s built-in protections… such as a chargeback.

Credit Cards

For all of these reasons above combined with card liability limits, fraud protection and other protections that come built-in with the Visa, Mastercard and Amex logos, credit cards protect a whole lot more than ACH/EFT. Cards limit your exposure to ID theft and they also limit your liability if someone steals your card and then, for example, buys a new car with it.

For payments, Paypal could choose to issue checks instead of requiring ACH/EFT. But, they have never wanted to go this route for payments. Instead, Paypal forces you to verify your Paypal account by giving them a routing number from your checking account. As I have said, this is not necessary and is a huge liability.

If you want to protect your money in your bank account from unauthorized transactions, you should not give Paypal (or any company) access to your checking account via routing numbers. Instead you should insist on the protections that credit cards offer. Credit cards are more than sufficient for anything that Paypal would need (at least for paying for merchandise). For merchants, you will need to determine what works best for you.

[UPDATE: 6/27/2012]

Paypal now has a new wrinkle in its verification process. When attempting to verify a checking account and your bank has a web portal (i.e., Wells Fargo), they will ask for the login and password to your bank’s web portal to do an ‘immediate’ verification. Don’t do it! Don’t give it to them. Paypal says they won’t store the credentials, but with all of the stolen information from various sites, do not trust ANY site with your bank’s web portal login and password. This should really be common sense, but maybe it isn’t. With that said, if you must verify a bank account with Paypal, do it the old fashioned method by letting Paypal make two small sized deposits. First, it makes Paypal give you about 25 cents. Second, you’re not giving out your bank’s web portal password to some random third party.

As much as I rant above about giving out routing numbers and blank checks, it’s far worse to give out your bank’s web portal login and password information. Do not do either if you can help it. However, if you can manage to set up a separate one-sided transfer system into a free savings or checking account for Paypal payments and transfers, then by all means set that up. Do not give Paypal access to your primary checking account with full access your bank account. Also, make sure that you have disabled overdraft protections on any accounts you give Paypal so that if they reach in and grab money out, when the account hits $0 it doesn’t go any further. You don’t want to be mopping up a mess of bad debits and at the same time having to pay interest payments on those bad debits. Paypal is not a bank and they’re not likely to reimburse you for any bad transactions leading to overdraft fees or interest accrued. So, avoid the issue and prevent Paypal from doing this damage in the first place.

39 Responses

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  1. Taylor said, on December 12, 2020 at 3:14 am

    I just posted a comment but it hasn’t shown up yet due to being in moderation so I can’t reply to it. But I left out some info. I signed up for online banking service so I am able to look at certain aspects of my bank accounts. When going to alerts, on the new account it says “The selected account does not have overdraft transfer service.” so does this mean that overdraft protection is not set up for that account and not linked to my other accounts for overdraft? I am just trying to be extra cautious with this since I really can’t afford to lose any of my money.


    • commorancy said, on December 14, 2020 at 6:37 am

      Hi Taylor,

      Yes, that statement by the bank means that overdraft protection is not enabled. It seems your bank is calling it “overdraft transfer service“. If you want to be certain, you’ll want to call your bank and talk to a representative.


  2. Taylor said, on December 12, 2020 at 2:48 am

    Sorry to bother you, but how do I check to see if overdraft protection is set up on my account? I just made a separate checking account for the purposes of verification on paypal in order to sell items. The bank representative never talked to me about this. Is that something that is automatically put on there or do you have to give permission? I have a bank through a credit union if that helps.


    • commorancy said, on December 14, 2020 at 6:34 am

      Hi Taylor,

      Thanks for your comment.

      Typically, overdraft protection is only set up if requested. Overdraft protection usually works if you have two or more accounts at the same bank, like a checking and a savings account. To set up overdraft protection with two accounts, you would need to have the bank assign a second account as overdraft for your first account. As an example, if the first account overdrafts, the bank will pull the funds from the second account to cover the amount overdrafted plus an overdraft fee.

      Although, some banks could set up overdraft protection as a form of credit, similar to a credit card. If overdraft protection is set up as a form of credit, the bank would need to run your credit to determine if they can extend that credit to you. Most banks prefer to use the two account approach.

      The reason most banks don’t set it up by default is that overdraft protection requires a fee if the account overdrafts, as in the example above. Because of this fee, most banks don’t set it up automatically.

      To find out definitively if your account is set up with overdraft protection, you should call your bank and ask a representative. They can look up your account and determine if this feature is set up. If you don’t recall having set it up when you created your account, then you probably didn’t.


  3. andy said, on December 9, 2020 at 8:26 pm

    Hi, I only want to sell a few items with ebay because I do not need or want them anymore. I have set my payment as paypal before reading this article. If I do as you say and make a new checking account then wouldn’t it still be connected to my main account and if so wouldn’t that make my main account along with the new account vulnerable? Also, if I bought one of those reloadable visa cards from the store would that be sufficient for paypal verification? I used paypal because I assumed it would be safer than just putting my card details on ebay, but now I’m thinking it might be a mistake.


    • andy said, on December 9, 2020 at 8:30 pm

      I’m hoping for a relatively quick reply even though I see you haven’t posted in years. I sold my first item earlier today, but only just noticed tonight. So the reply needs to be quick as I need to accept payment and send out the item. If I bought a reloadable card and it were to work for verification on paypal, would I be able to withdraw cash from it? I’ve never had one before, but I thought it could be safer than opening up a new bank account if it’ll work for verification on paypal.


      • commorancy said, on December 10, 2020 at 4:22 am

        Unfortunately, verification on Paypal is still by bank account only AFAIK. These reloadable cards do not act like bank accounts nor do they offer bank account numbers. There’s not really a fast way to set up a sales system that accepts payment overnight that I am aware of.

        You could check with Etsy or maybe Amazon as a seller, but I’m pretty sure they also take a few days to set up and verify. This is mostly because of the anti-money-laundering laws.


      • commorancy said, on December 10, 2020 at 4:31 am

        I should also point out for any future readers / sellers that verifying a bank account with PayPal can take several days because PayPal sends two small deposits to the bank account that must be verified manually by the account holder. It can take a couple of days before these transactions show up on the bank account statement before verification is possible.


    • commorancy said, on December 9, 2020 at 8:47 pm

      Hi Andy,

      Thanks for commenting.

      Associated accounts within the same bank system can’t be crossed over by Paypal unless you set up a feature like overdraft protection between the two accounts or by giving Paypal direct access. As long as overdraft protection between the accounts is not setup, then there is no way for Paypal to reach into an unauthorized account it doesn’t have access to, regardless of being associated at the bank.

      The only way Paypal can access a specific bank account is if they have the routing number and, more specifically, the account number. Those numbers give Paypal direct access to that and only that bank account regardless of how many other accounts may be associated at the bank.

      If you’re concerned with account linking, but you want to have your Paypal account verified, you can hook the bank account up to Paypal, but then ask your bank to change the account number after Paypal verifies you.

      This account number change will not be sent to Paypal automatically. If you change your bank account number, it is on you to inform Paypal of this change. However, even with an invalid bank account number, a Paypal verified account remains verified. This means that as long as Paypal doesn’t attempt to post any transactions to that now defunct bank account number, they’ll never know the bank account number is invalid.

      However, that bank account number change can make it difficult to get your money out of Paypal when you get money sent to you via Paypal. Unfortunately, Paypal has very limited ways of getting money out of Paypal… and this includes basically one choice, sending the money to a linked bank account via ACH.

      Note linking accounts can be setup for one way access. For example:

      Primary <- Secondary — where the primary account has linked to the secondary account as one-way access. This allows the primary account to transfer money in or out of the secondary. However, the secondary has no access to the primary at all. Setting up access on primary to the secondary account doesn't automatically set it up on the secondary account to the primary. If you want two way access, you would need to set up access on both accounts separately. Even then, Paypal wouldn't be able to request a transfer from the primary to the secondary or vice versa without knowing the account numbers for both the primary and the secondary accounts.

      Hopefully this helps.


      • andy said, on December 10, 2020 at 12:16 am

        I like my bank because of various reasons, but would it be a better idea to open the new account with a different company? That way there’s no possibility that it can be linked with the one I always use.


        • commorancy said, on December 10, 2020 at 1:32 am

          Hi Andy,

          I don’t know if it really makes a big difference. If you want to open a separate account at a different bank, that will work… but it’s not really necessary. Even two accounts at the same bank must remain entirely separate by the bank. They have to be separate because of bank rules. Other than overdraft protection, there’s no way Paypal can pull more money out of any specific account than is in there. If the account gets to 0, the bank will stop paying.

          Note, however, that some banks will allow a small amount of overdraft on an account, sometimes up to $100, before declining the transaction. You will need to contact your bank to ask about this aspect of your account if you’re concerned that Paypal could overdraft your account. Note that if a bank does allow a small amount of overdraft, they will likely charge you a fee for this service.

          What I recommend is to open a separate account for use with Paypal, but it doesn’t really matter where the account exists. This account should be dedicated to Paypal payments (or other similar seller payments from other places). That way when you get paid, you can immediately transfer the money from that account to your primary account. If Paypal comes along and attempts to claw the money back (for any reason) after you’ve transferred it, then it won’t be in there to claw it back. There is no way Paypal can reach into your primary account to take that money back. Though, Paypal may get upset if they attempt to claw back money that they deposited and they get an NSF from the bank.

          Hopefully this clarifies.


          • commorancy said, on December 14, 2020 at 9:13 pm

            Hi Andy,

            One benefit of having your accounts at the same bank, is the speed at which money can transfer. Typically, with two accounts at the same bank the money can transfer almost instantly. However, with two accounts at two separate banks, the transfer process can take several days to complete depending on the banks involved.

            Why is speed important? If you’re concerned that PayPal could clawback money quickly, it could happen faster than an ACH transfer completes between two separate banks. For this reason, it is better to have the two accounts at the same bank simply for speed of transfer, which can take at most a couple of hours. Sometimes way less.


      • Chris C. said, on December 12, 2020 at 1:24 am

        Amazing to see someone commenting on this 11 years later 😉. But as before, it’s excellent advice and I was glad to re-read this again.

        I don’t remember exactly how I set it up at the time but I did follow commorancy’s advice and it worked perfectly.

        You have to be extremely proactive when it comes to PayPal and let them understand that you own this bank account, not them, which means setting up an account just for PayPal and to keep it empty at all times with no overdraft like has been said to protect you should fraud occur (which unfortunately is still not uncommon on eBay and aliexpress). By the way, this advice has helped me on another account I had when it was hacked – No overdraft, damage was minimal, banker congratulated me on my prudence 😉

        Liked by 1 person

  4. Human Race said, on January 11, 2017 at 12:01 pm

    Paypal new scam to get your bank account information, pay later for purchases only can used if they have your Bank account Info


    • commorancy said, on January 11, 2017 at 3:05 pm

      Hi HR,

      This is not surprising for Paypal. They require bank info to even really use PayPal. Sure, you can use PayPal without bank info, but not for very long before you get blocked for sending limits. It makes sense for them to carry this forward for all new features.


  5. Morison sama said, on August 12, 2016 at 5:58 am

    Waoooo thank you so much for that briliant idea, you know honestly i have been thinking of these all these while, but thank you for the confidense and zeal you have giving to my intention


  6. EB said, on June 16, 2016 at 5:14 pm

    I don’t use paypal anymore. As a vendor I was major ripped off. I once used them also as a payment venue, but now I’d rather forget about them completely. I do know if there is a buyer dispute where you are legally entitled to a refund and have been scammed by a seller (ex: ebay), you may have an uncomfortable delay in getting refunded by paypal- IF that payment was thru your checking account, or its debit card. Really. At least, be careful.


    • commorancy said, on June 17, 2016 at 1:09 am

      Hi EB,

      Yes, I agree.. always be absolutely certain that what you are buying is something you absolutely plan on keeping. If you’re buying something ‘just to see’ or ‘as a trial’, then you don’t buy it through Paypal. Find it on Amazon or from an established retailer with real return policies and pay directly with your credit card, not through Paypal. Many credit cards today have buyer protection plans up to a certain amount. You should contact your credit card and ask about buyer protection with your card. Even still, if your card doesn’t have buyer protection, you can always dispute a charge with your card company. However, if you buy through Paypal and dispute the charge without going through Paypal’s claim process, you’re likely to lose your Paypal account and never be able to use that card with Paypal again.

      If there is even the slightest chance you plan on returning the merchandise, then pay directly with your card or buy it locally in a store with an established return policy.


  7. Pete said, on April 28, 2015 at 8:26 am

    Hi I just want to use my bank account so people can deposit money into because I stream on twitch. Should I just open a second account soley for deposits and use my card for payments?


    • commorancy said, on April 28, 2015 at 12:14 pm

      I always recommend a separate account for Paypal use. Once you link your two accounts, it’s easy to move the money from your Paypal checking account into your regular checking account. Having two accounts prevents Paypal from overstepping its bounds and doing something inappropriate with the money in that account. Also, if you have troubles with Paypal and need to close out a checking account, you don’t have to worry about changing your checks and other things linked to your regular checking account (i.e., losing bill pay, having to rebuild everything, etc).

      And yes, you can use your card for payments because once you verify your account with Paypal, your sending limits will be lifted. Note that payments received into your Paypal account don’t automatically get deposited into your checking account. Paypal only does this when a certain amount of money has been received and after a certain amount of time. Until then, the money is floating in a Paypal account.


  8. Concerned Reader said, on April 5, 2015 at 11:46 am

    Bank routing numbers are public knowledge. I will assume that you are referring to the actual account number that is separate from the routing number. A routing number alone is useless to anyone without a bank account number attached. And yes, in order to link an account to PayPal they must have that information. However, Paypal also offers alternative methods for “loading” a PayPal account. You can go to Walmart, CVS, Walgreens, and the like to purchase a PayPal load card. This method allows one to use PayPal services without potentially exposing any banking information. Albeit, PayPal is the industries leader in development of secure transaction technology and comprised information is rare. They even provide additional security with multiple layers of verification.

    I have owned and used a PayPal business debit and merchant account since 2008, and the only time that I have suffered from overdraft charges related to “back-up” bank account was when I had not properly accounted for funds. As far as no refunds on intangible items, that is outlined in the agreement before anyone chooses to use PayPal. It is their policy, and “no refunds” are often stated on vendor websites before purchasing.

    It is easy to throw bad publicity around about a service when we choose not to acknowledge our own responsibility. IF YOU READ what you are agreeing to, you can make a truly informed decision. And by doing so, reap the benefits.


    • Concerned Reader said, on April 5, 2015 at 12:14 pm

      additionally, many prepaid debit cards that offer direct deposit, provide a bank routing & account number to provide to your hr/payroll department. This information can be used to setup and link a bank account, and verify a paypal account also. Since the card is prepaid, it cannot be over-drafted. There is no need to fund the card until you are ready to make a purchase..


      • commorancy said, on April 5, 2015 at 4:15 pm

        As I said in my previous reply, you should read the fine print on all refillable prepaid debit cards because, as I said earlier, purchasing a prepaid debit card means you are opening a bank account with the bank listed on the card literature. And, before you do that, you should research who that bank really is. You might find that you ultimately don’t like the terms that that bank account offers. It might also be worth considering opening a bank account locally as you’ll also receive local benefits such as ATM machines for deposits, mobile apps, in addition to debit cards. Again, though, ACH is ACH is ACH. Once you link your routing+account number with an entity, you’ve given a blank check to that entity. A blank check that, I might add, is almost impossible to revoke without closing the bank account.

        As for overdraft issues, you should read all literature carefully around NSF and overdrafts for your bank account. Many banks will institute NSF/overdraft fees whether or not the overdraft was successful. The simple act of debiting the card more than the amount that’s in the account could initiate a ‘handling fee’ to return the NSF notice to the institution attempting the withdrawal. In other words, your bank can still assess an NSF fee from you even if the person or entity requesting the withdrawal receives nothing but an NSF error.

        Note that with credit cards.. When your credit has been used up, you’ll receive a decline when attempting to purchase. While this concept is very similar to an NSF, there have typically never been fees instituted on a declined credit card. Unfortunately, bank accounts do not follow these same rules. Banks institute fees whenever they can and issuing an NSF response is considered ‘special handling’ of your account. This ‘special handling’ can require fees to cover that ‘service’.


    • commorancy said, on April 5, 2015 at 3:38 pm

      Hi Concerned,

      Thanks for your comments. Let’s understand the audience for this article. It is not intended as either a tutorial of how to set up access with Paypal nor is it intended for someone who has no knowledge of bank accounts or routing numbers, to which you imply. Anyone reading my article would fully understand that when I say ‘routing number’ that that must include providing an ‘account number’. Without the account number, attempting to set up such a link to Paypal would fail. Of course, you split hairs because you can, not because it’s productive here.

      While I understand your points and yes a routing number itself is public knowledge, a routing number by itself doesn’t give access to your account. Additionally, anyone asking for such access would be very explicit on what they would need to make such a link to your account. Further, my point, that you seem to have missed, is that Paypal requires unfettered ACH access to lift sending restrictions. In other words, Paypal will not settle for or lift the sending restrictions by credit card alone. They still require access to an account containing a positive balance, effectively a bank account.

      This means that unless you are careful, you are giving Paypal access to an account that can be debited at will for any amount that Paypal authorizes whether just or not. Again, nothing to which you have stated negates the blank check to which you have given Paypal access through the account link that you have willingly provided. Whether that is a prepaid debit card, a savings account, an IRA account, a stock plan account or any other account that contains a routing number, an account number and positive balance. And let’s understand that should you read the terms carefully on the prepaid debit refillable cards you can buy at drugstores, you’ll understand that you are in point of fact, opening a bank account containing a debit card.

      My point isn’t to tutor you in the ways of how to set up such links with banks or in the purchase of debit cards (though they can be helpful with Paypal), my point is to show the dangers of such activities with personal finances. That you have personally had success with Paypal as a merchant is anecdotal. In general, unless it’s absolutely necessary, no one should give unfettered access to accounts that contain a positive balance without proper and careful evaluation supporting the need for such access. In other words, you do not NEED Paypal to buy or sell things on the Internet. It is but one service in among many. Because it is not a bank or a lender and because Paypal chooses to remain a nebulous financial entity, it does not fall under such insurance plans like FDIC or FSLIC or any other federally insured depositor program.

      For this reason, going to the store and buying a Paypal refill card could be tantamount to throwing your money away. If you buy such a Paypal refill card and Paypal turns around and closes your account the next day, they are under no federal obligation (or, indeed, any obligation) to repay you any money sitting in your now-closed Paypal account. They are also under no such insurance plans that require the government to reimburse you as a depositor as they are not a bank. Because of the protections afforded to official banking institutions and because Paypal has opted not to become a bank, they are under no such protections or obligations.

      For example, if you had $10,000 sitting in your Paypal account and your Paypal account was closed by Paypal (for whatever reason), there would be little you could do about it except hire a lawyer, sue them and hope for the best. That $10,000 would be stuck in limbo. Because that sum of money is not insignificant, Paypal’s actions might fall under some kind of felony. But, they are a corporation. Worse, your lawyer would likely eat up that entire $10,000 in just trying to get that money back. Additionally, you cannot turn to the federal government for help as they aren’t a bank and do not fall under banking rules, regulations or insurance plans.

      For these reasons alone, you shouldn’t trust Paypal with your money.


  9. CJ said, on March 18, 2015 at 7:37 am

    I had a paypal account some 4 or 5 years ago- I bought some IT service from a guy in Denmark. He took my money and never delivered the program- nothing. I disputed it and since it was not a tangible item ebay and paypal told me i had no recourse and they would not force him to return my money. I then contacted my bank and had them reverse the payment and placed my money back in my account. At the time i believe paypal had my social security and bank account information. Of course paypal then says i owe them, the scammer got to keep my money and paypal is suppository is the only loser. Now it is 4-5 years later I have a new address, new bank and bank account. I opened a new ebay account and a new paypal account that has been current for 2-3 years with little or no transaction except to buy 3 or 4 things over 12 months- so far no connection or problem in reference to the old paypal account that is negative. I now have started to sell with this new account and have successfully past paypal 90 day probation time (i have sold over 25 items over $500 worth sold and i have 100 % positive feedback with 40 or so sells and now i no longer have to wait to get my funds from my buyers as i get the funds now without waiting. Now to my concern- so far i have never withdrawn any money and paypal is only linked to my bank debit card- which i have learned paypal will not allow me to withdraw funds to. They want me to add my bank account- my concern is if i do this they then match me to the old negative account from 4-5 years ago and decide to keep my current $400 paypal balance and even go into my bank account and get the remainder ( the amount in dispute from the old negative account is around $500)

    Since all has been fine so far if i have paypal veifiy my new bank account so i can withdraw funds will i open the door to paypal connecting me to the old account and keep my money? Should i never withdraw the money to avoid this or do you think i am safe to link my new account to withdraw my money? Do you have any suggestions? I do want to withdraw my money but i am afraid to link my bank account- Please any info would be helpful



    • commorancy said, on March 28, 2015 at 5:00 pm

      Hi CJ,

      Sorry for the slow response as WordPress doesn’t always notify me timely of new comments.

      The difficulty that Paypal faces with attempting collections in this situation and on that alleged debt is 1) Paypal is not a bank or a creditor (unless you hold the Paypal credit card) and 2) the bank has already deemed it to be fraudulent and worthy of a chargeback. Bank’s aren’t often willing to perform chargebacks without extensive investigations. That Paypal / eBay didn’t uphold their own Buyer Protection Program is worrisome and problematic for Paypal, especially after the bank agreed to and performed the chargeback. This means that Paypal is firmly left holding the bag in this case. They have to eat the cost of this. They had the obligation to both refund you and collect the money back from the seller or otherwise close out that seller’s account. They chose not to do this under their Buyer Protection program. Depending on the dollar amount of the transaction, Paypal has likely already written the amount off of their books. They may have handed it over to a collection agency, but you’d probably already know this because you should have received a dunning letter from a collections agency. The problem for Paypal is that, unless you hold a Paypal credit card, Paypal isn’t a creditor or a bank. They have no leg to stand on when they claim you owe them a debt. If you refuse to pay, the worst they can do is close your account.

      Since you have started over fresh with a new bank, bank account, Paypal account and eBay account, they likely can’t tie any of this to to the old account. If you don’t give Paypal any reason to investigate the old account in relation to your new account, then it won’t be a problem. For example, were you to link any similar information between the two accounts (such as social security), they could tie the two accounts together and attempt to extract the alleged owed money from your new Paypal account in payment for the old account. I would avoid linking such similar information. There’s always the possibility an auditor of Paypal could find your new account and a link to the old account to attempt to collect on that alleged outstanding debt. However, if the debt is already written off, an auditor wouldn’t usually be looking at old write offs.

      Since your bank, bank account, Paypal and eBay logins are entirely new, they would have no reason to tie the two accounts together. If you’re long-term concerned over Paypal’s practices, you might want to consider setting up your own merchant account separately on your own e-commerce site. This would allow you to collect payments directly without the need to use Paypal. Setting up a merchant account typically requires a commercial bank account which is typically more costly than a personal account. But, it prevents the need of being held hostage to something that may be in your past.

      Alternatively, there are other payment processors you may be able to use instead such as Amazon Checkout or Square. These payment systems are similar to Paypal, but using them would never tie your old Paypal account back to you (unless they somehow become owned by Paypal). I know that it’s tempting to use Paypal in combination with eBay because it’s so conveniently integrated. But, there’s a lot to be said for setting up your own merchant account so you can collect payments directly. When setting up your own e-commerce site with a payment processor, make sure the payment processor is not Payflow or otherwise owned by Paypal. Note that many banks offering commercial accounts also offer payment processing systems. You should read the terms for these systems to 1) make sure it’s not owned by Paypal and 2) offers competitive fees. There are many payment processors (such as Square) that offer reasonable per transaction fee costs.

      I hope this helps.



  10. Survêtement Homme said, on May 22, 2014 at 7:23 pm

    Does your site have a contact page? I’m having trouble locating it but, I’d like to send you an e-mail. I’ve got some recommendations for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it grow over time.


  11. Chris C. said, on October 10, 2013 at 5:14 pm

    Now we need an alternative to bypass PayPal so-called ‘sending limit’. I just hit it after 7 years and wonder whether I shouldn’t set up another credit card and start afresh. Would it work? I will not give out my bank account to anyone, period!


    • commorancy said, on October 10, 2013 at 5:42 pm

      Hi Chris,

      I’d suggest setting up a throw away bank account. Transfer in just enough to keep it open and use that to verify and lift the sending limits. You can probably even close the account and Paypal wouldn’t even know as long as you don’t ever try to use it. That should lift the sending limits.


      • Chris C. said, on October 10, 2013 at 7:35 pm

        Great tip! I’ll try that, thanks for the speedy reply!


        • yeoldfaithful said, on June 17, 2016 at 5:01 am

          I just wanted to say that I still follow your blog and refer to it for my advice to others. It has been truly invaluable and I have since your last advice become verified on an account that I closed within the year after PayPal decided, on one specific transaction, to extract funds from this empty account without permission (“Oh we changed the way we do business whether you like it or not”) causing an overdraft. I got my bank involved and they promptly backtracked and paid the overdraft fee, made sure my credit card would become the default, removed the checking account as an option from my payment page (I have since closed it and tlod them so) and added the option to pay with my credit card directly, which was a major victory for me. I guess being in Canada helped, we have good consumer protection laws, or perhaps they got sued once too many here. It’s been smooth sailing since. Thanks a million for keeping this great resource alive!


  12. Matthew said, on July 20, 2013 at 6:06 am

    I have been getting notices to link my account. This is the info i was looking for.

    Liked by 1 person

  13. Ian Arthur Carlson (@iyeru) said, on June 18, 2013 at 11:41 pm

    If you have a credit union, it’s likely they’ll default to the old fashioned way, since it uses a different insurance system / etc. I have a credit union, and I’d never trust a credit card nor a full-on bank with my money.


    • commorancy said, on June 18, 2013 at 11:52 pm

      Hi Ian,

      ACH is ACH no matter what type of business holds onto your money. Insurance only covers loss through no fault of your own. Unfortunately, once you hand over your routing number to Paypal, you have given them explicit blank check access to both withdraw and deposit to your account. Once explicit permission is given to a company, no insurance will cover a withdrawal by the company to which you gave permission. There is no ‘old-fashioned’ way unless you are thinking Paypal will cut you a check for payments. Paypal doesn’t do payments like this. If Paypal needs to debit your account, the only way that will happen if you give them your routing number. Otherwise, they can’t verify your account.

      Having an intermediary account is the only way to protect your main checking account. You want to link your main checking account to the intermediary, but do not allow overdraft from the intermediary into your main account. If the intermediary gets to $0 balance, it should return NSF to Paypal. In fact, you should insist that your bank set it so that it returns NSF at exactly $0. Some banks are generous and will let the account overdraw up to $20-50 (or more). Then, they charge you a fee if it stays like this.

      The point, ACH is inherently dangerous given to a company like Paypal that has no insurance and is not considered a bank. If you’re suggesting that you use your credit union like Paypal, good luck with that. As far as I know there are few payment systems on the Internet that function like Paypal. I don’t know of any credit unions doing what Paypal does. Although, it would be a lot more cool if some big banks would set this up.


      • mirazi said, on November 15, 2013 at 3:53 pm

        if i delink my bank account, does that revoke permission for paypal to withdrawl??


        • commorancy said, on November 15, 2013 at 11:31 pm

          Hi mirazi,

          Delinking your bank bank account should prevent Paypal from using it for withdrawls. However, delinking your account will likely reimpose the sending limits. This could prevent you from being able to use your Paypal account if your account is over their default sending limits.

          Note that delinking your account may not be a fast process and it doesn’t mean that Paypal will remove your account routing information from their system entirely. So, it’s possible that Paypal could recover your account information and do something by accident.

          The best thing to do is discuss this with your bank. I might suggest asking your bank to open another account with an entirely new account number, then transfer your money into that leaving just enough to keep the other account open. You can leave the old account number (that’s in Paypal) open until you update any other sites that use it, then you can shut it down entirely when you know you no longer need it. Note that shutting down an account doesn’t automatically remove it from Paypal. So, Paypal will keep the sending limits turned off even if the bank account has long since closed. If Paypal tries to do anything with that bank account and it fails, they may remove it from the account automatically.

          If you consistently use only credit cards for payment, having that dead bank account number in there will help you keep the sending limits turned off.


  14. Blue Dog said, on August 24, 2012 at 5:49 am

    Great information! Thank You!! : )


  15. paula said, on November 18, 2011 at 3:49 pm

    Very helpful! Much thanks for the detailed, reasoned article.


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