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Comment by foggyToads | Hacker News Reader

How does that protect against them erroneously withdrawing large sums from your account and hitting you with overdraft or repeated NSF fees?

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His argument wasn't about protecting himself from Paypal's erroneous withdrawals. It's about not letting paypal to freeze his funds at Paypal

I (always and forever) maintain accounts with NO overdraft. Banks like overdraft. I don't.

If something bounces, then I will handle it within 24h. Again, this is the setup that covers my needs. A different organizations with different needs should have different process/controls to match their liquidity/easy-to-access-cash needs.

It stops them from freezing the account on Paypal. If you really want to insulate from the service you would set up a similar job at your bank that would immediately transfer the funds out of that account and into some other account. But honestly if you are going to this much trouble is it even worth it to use Paypal?

Just about any processor, Stripe included, stipulates they can withdraw from your account. And what if their systems are hacked, disclosing your account and routing numbers to an ill-intentioned third party?

You probably want this as a generic fail safe for any account that you disclose the account an routing number to an outside entity.

This is why bank preventing unauthorized withdrawals is so useful. And credit card processor disputes too.

Please elaborate on the means to prevent unauthorized withdrawals.

If you have someone's bank account number, you can pretty much take money out of it. By default there is no real authorization process by which the account holder is asked to allow the withdrawal. There is just the assumption that people aren't going to commit fraud, or people who commit fraud will be caught.

I'm not an expert on this, but I believe there are ways to set up business accounts where money can't be taken out in that way, at least not by the standard electronic means. You can also manage accounts in such a way as that there's no money to take out, although that does not necessarily prevent the account from going into the negative. Checking accounts can go into significant negative balances if the bank chooses to allow it.

It is more difficult than you describe it. To set up a monthly payment the bank verifies the request (e.g. if you sign such direct debit for the gym or your electricity bill). Every ebamli I ever used has a page with all these direct debit setups and alerts you when a new one is made to bring your attention to it. These also have limits. And a decent bank would scrutinize the direct debit. A gym or Vodafone will fly easier than a direct debit to VodkaPotatoLimited in Russia or China (no offense) when you live in the UK.

As to prevent the overdraft, just ask the bank to NOT have overdraft capacity on your account(s).

You can just print a check with the account and routing number.

Isn't the max loss there rather tiny? Especially if you have overdraft off on the paypal bank account. You can disconnect the account if something happens and there are fees accruing.

Edit: I'm replying to a really low odds scenario, where:

1. You auto sweep all money out of paypal

2. You regularly empty the checking account it sends to

You have at risk maybe $1000-$2000 in the chequing + less than $100 in fees.

For something vanishingly unlikely to happen. The risk seems rather low compared to the exposure.

I mostly use stripe and have PayPal as a backup. Never had a problem with either, and if I did have a problem with one the amounts are fairly low. (Probably more of an amount risk with stripe as they take longer to sweep out the money. But I don't think they freeze as often)

The loss of money can be small compared to loss of business.

It is an interesting angle to try a civil suit for.

I was inspired from a couple of videos for my "flows"/management.

This speaks about keeping 7 accounts: https://m.youtube.com/watch?v=auzLhKvsxnQ

There is a Tom Ferry (real estate guy but has some sound tips) also has on a video a VERY good flow diagram on how to distribute money in different buckets/accounts. Apologies but I couldn't find it on my phone.

I was "inspired" by the above and once I organized my accounts/flows and stopped using "single account for all" my life became so much simpler. And of course PayPal wallet is not a permanent parking space for £€¥$.

Have a decent bank on the other end that doesn't charge erroneous overdraft and NSF fees?

I always go (and suggest to others) for the "bounced payment" (and it has never happened in my life). But banks really love overdrafts. It is a major source of income. I prefer to get an angry email and throw a freebie and sort this out than having the bank ripping me off. This way I show my counterpart that "hey mistakes happen here is your money and let me buy you dinner to show you that we are good", than having to the other person getting paid and me ebfing paying 5x that dinner cost.

Overdraft is a loan. Would you get a loan with insane interest rate and fees just to get a payment go through? Not me.

Yea I was wondering this too. In the case of something like an eBay transaction, can't PayPal pull the funds from your bank to appease a buyer?

The only account I let PayPal know anything about is dedicated to that purpose and nearly always has zero dollars in it.

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