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Comment by Tarball10 | Hacker News Reader

Holding money (or crypto) in PayPal is a terrible idea. They are not a bank, they do not abide by banking regulations. They can lock you out of your account and your money at any time and leave you going in circles with their offshore support.

Yes, they are somewhat of a necessary evil if you do any online peer-to-peer buying/selling, since they are the only money transfer service that provides some level of "buyer protection", but you want to do the bare minimum with PayPal to avoid unnecessary risk.

Link one bank account (not your primary) to PayPal to receive money, and transfer received money immediately. Link one credit card for purchases. Nothing else. Do not link debit cards, do not sign up for their "balance account" where money is held in PayPal (no matter how hard they push it with UI dark patterns in their app), do not sign up for their crypto account.

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If you link your bank, and approve direct debit (it’s just a popup with yes/later - very risky move), they will eventually withdraw from it when there are any issues. And most likely you’ll lose more disputes when your bank is linked - but no proof of this so take it with a grain of salt.

Fortunately I can review direct debit consents and revoke them via my bank's web app UI.

I've seen such features on business accounts (Wells Fargo ACH Fraud Filter, JPMorgan ACH Debit Block, etc).

What bank allows that on a consumer account?

Every bank in Germany allows you to dispute transactions done with Debits.

And they make it as difficult and hidden as possible. At the same time they advertise to "support sepa now" as if it's something new while by law they have to process such transactions within two hours for over 10 years now.

At ING it's just a button click. It's directly next to the transaction on their app.

ING is Dutch, not German.

There's also ING in Germany. They are super famous.

They are not called Ing Diba anymore.

Barclay is there now too, London and Amsterdam are taking over.

I use mbank.pl (Poland, EU regulations apply). What do consumers do if they have accounts in banks which don't have this feature in case they want to revoke DD consent?

Mercury's personal banking product allows you to reject ACH transactions before they clear. They also allow you to generate virtual account numbers, so you can easily cut off an entity without having to change your main account number. Unfortunately Mercury charges a monthly fee.

That's pretty cool! I didn't know about that.

For anyone curious, the fee is $240/yr.

I used Mercury when I had an LLC and had a great experience. It feels like they're the only bank that's not 10 years behind in technology. I've never tried their personal banking, but the ACH denial power makes me a lot more curious.

Probably every EU bank: https://docs.adyen.com/risk-management/chargeback-guidelines...

SEPA Direct Debit (the standard way to debit accounts within the SEPA, i.e. roughly "Europe/Eurozone") gives you 8 weeks to revert a debit that you disagree with. Whether a bank exposes this in the UI or not depends on the bank.

https://monzo.com/help/payments-getting-started/cancel-direc...

Even if that's the case, why even put yourself in that position in the first place?

Plus they have a history of freezing people’s money for months on end for flimsy reasons.

Staring at a “you can no longer do business with PayPal” email myself. No clue what I did, no recourse, now locked out of a fuckton of global marketplaces and peer to peer transactions that uniquely only work on a platform like PayPal.

If only there was a technology which fixes this...

It would have to handle chargebacks and resolve disputes.

Those are functions of a marketplace, a low-cost pseudo-legal system so that you hopefully avoid using a state's costly and slow legal system. But if marketplaces also own the medium of exchange, e.g. marketplaces that issue tokens and only allow transacting in tokens (Paypal behind the scenes), their economic incentive is not to resolve disputes, but to create as many barriers as possible to converting tokens back into value as they can get away with, since this becomes the profit center of the business.

And, when the only medium of exchange available to consumers and merchants is through one of these tokenized marketplaces, getting locked out of marketplaces means getting locked out of doing business entirely with no recourse or alternative.

Mediums of exchange should be neutral, and self-sovereign exchange has to be an option in order for marketplaces to offer competitive marketplace services, else they just abuse their monopoly on medium of exchange.

It's pretty nice, e.g. that when I buy a leash, it doesn't also have to walk the dog. Maybe for some, it's ideal to have someone else walk the dog, and the dog walker can even insist on bringing their own leash, but having the option of buying my own leash, putting it on my dog, and walking it myself means I don't need anyone's permission to own a dog, (not a big deal in the case of dog-walkers since there are so many) and substantially lowers the premium that dog-walkers can command in the marketplace for their services.

The problem is that there are two parties in any transaction, and power users/casual users swayed by marketing will be the ones that will choose the medium on which the transaction will take place.

So while you may want a self-sovereign exchange, your counterparty doesn't give a shit about your preferences, or is actively happy with using PayPal (Because their dispute resolution is better biased towards their side of the transaction, or because they just never gave it a second thought.)

One can argue about the difficulty of overcoming network effects to make mediums of exchange viable until the cows come home but that's orthogonal to the issue GP raised and ultimately impossible to predict.

As a counterpoint to the rhetorical impossibility of a challenger overcoming an incumbent (in almost all subjects this is true, despite challengers in the world regularly overcoming incumbents), exchange rates indicate markets are positive about the network effect threshold being overcome, since if it is impossible to overcome, the value of all cryptocurrencies combined is approximately 0.

"If only there was a technology which fixes this..."

"Those are functions of a marketplace"

Then it seems you should have said "If only there was a technology and a marketplace which fixes this..."

And no, it doesn't exist because handling disputes is a hard problem. It's the actual moat of PayPal (and credit card companies) and the reason why they can get away with their crappy behaviour.

The comment I responded to said:

> No clue what I did, no recourse, now locked out of a fuckton of global marketplaces and peer to peer transactions that uniquely only work on a platform like PayPal.

I am not saying there is a single technology that is completely at parity without paypal without the problems, I'm saying that there is a technology which can give you access to global marketplaces and peer-to-peer transacting if you are locked out of the paypal/CC system.

And the payment processors don't have a moat in their sophistication in dispute resolution. This is a hard problem, but a solvable one if you have lots of liquidity: e.g Amazon, AliExpress. Their moat is having lots of liquidity, regulatory capture, and network effects.

That's what escrow is for?

Places like swapd that operate on crypto escrow every transaction to lessen these crypto problems.

I had one of these. My account ended up eventually being reinstated. No reason was given for the initial account freeze or reinstating.

One thing I did - in response to them saying I could no longer do business, I told them that they also could no longer do business with me, requested a copy of all of the user data they had on me under CCPA, and told them to then delete all of my personal information. They did not actually comply and I didn't pursue. I probably should, though.

you should get a lawyer and try to sue in small claims court, it is the fastest path vs. anything they will surface to you. even by saying this I put myself at risk but they are truly a demonic organization

s/demonic/pernicious

As others have pointed out, legal is fastest approach with them.

If this happens to you, I imagine it is grounds for legal action?

In europe, Paypal Sarl is a bank subject to bank regulations

Good point. I should have clarified that I'm referring specifically to PayPal in the US, which themselves state that "PayPal is not a bank, does not take deposits and is not FDIC insured".

https://www.paypal.com/us/legalhub/paypal/program-banks-tnc

It isn’t subject to the EU statutory deposit insurance, however.

Edit: The above means that deposits on your PayPal account aren’t insured, different from regular bank accounts in the EU. This is a frequently emphasized caveat regarding the use of PayPal as a bank account in the EU.

Is that an issue if you don't plan to "store" money in PayPal but only use it for payments?

In that case it isn’t, but this thread is specifically about holding money in PayPal: https://news.ycombinator.com/item?id=45250598

My point is that one doesn’t get all the protections normally taken for granted for EU bank accounts.

You'd be surprised. A lot of sellers don't "cash out" from paypal all that often, letting tens of thousands pile up. (And inevitably, some of them get hit with arbitrary account closures and have that money seized)

The question is if a EU bank has to provide deposit insurance but PayPal does not how can PayPal be a bank.

I haven’t researched the details, but it doesn’t work that way, because they aren’t providing regular bank accounts.

PayPal might be a bank but maybe PayPal accounts aren't bank accounts

But they don’t offer deposit guarantee. Banks usually have to in the EU

> They are not a bank, they do not abide by banking regulations.

"In 2008, PayPal Europe was granted a Luxembourg banking license, which, under European Union (EU) law, allows it to conduct banking business throughout the EU.[173] It is therefore regulated as a bank by Luxembourg's banking supervisory authority" https://en.wikipedia.org/wiki/PayPal#Regulation

You're not wrong that they don't act like an honest bank, or abides by any sort of ethics about whose money it really is that they're holding onto... but know that they are regulated in case that ever helps you!

This is all true, but are they actually any worse than any other crypto exchange? I just take it as a given that a crypto exchange can lock me out and steal my money at any time with no legal consequence, and so I try to keep as little money in them as possible. And at least PayPal is older and likely to have more senior engineers and fewer vibe coders, and thus be less likely to lose everything because of an elementary security error.

No startup can compete with PayPal's decades long track record of suspending accounts and freezing funds.

Only Stripe apparently based on the Tell HN posts I've seen

> Link one bank account (not your primary) to PayPal to receive money, and transfer received money immediately.

Costs 1.5%. Or wait a few days.[1] Plus a fee for receiving cryptocurrency. There are additional fees for buying cryptocurrencies, other than PayPal's own. And none of this is FDIC insured.

[1] https://www.paypal.com/us/legalhub/paypal/pp-balance-tnc?loc...

I think they meant, initiate the transfer immediately. There's no need to pay for the "fast" transfer vs standard ACH.

Does PayPal support FedNow? Bank-to-bank transfers in under 10 seconds, for $0.045 each? Nah.

How many banks do? Not just theoretically, but practically.

Mine does supposedly but does not let me, the account holder, use FedNow. Instead I'm stuck using Zelle which I can hit the limits of just by paying a mortgage payment.

With PayPal in the UK you can do an instant transfer for free or pay extra for a two-day transfer. I don't know why the option is still there or why anyone would choose it.

Their fees for cryptocurrency are small (between 1.5% - 2.5% depending on amounts, higher amounts have a lower fee), but they take it on both the buying and selling end. So if the amounts you're moving require a 1.8% fee, then for both buying and selling you end up with 3.6% in fees. Coinbase and most other CEXes charge this and they claim part of the fee is due to instability in the price, so this fee acts as a spread they can use to not lose money.

I assume you can't use Crypto instead of the bank account link, you probably require both. Otherwise this might have some use as another blast radius reducer for Paypal's antics.

I switched to a hardly used checking account for paypal after they held $20 hostage for a couple months after selling an old video card on ebay. I'd heard some one say their bank account had become frozen by paypal during a dispute and that event reminded me of it enough to get some separation.

Just treat it as your checking account; for anything substantial, move it to the self-custody

> They are not a bank, they do not abide by banking regulations.

In the US, this is true with some important caveats.

"If you have opened a PayPal Debit Card Mastercard® account, enrolled in Direct Deposit, or bought or received cryptocurrency with your personal PayPal Balance account, we will place your U.S. dollar PayPal Balance funds at one or more Program Banks. Any other balance funds and all cryptocurrencies are not held in FDIC insured bank deposits. Cryptocurrencies may lose value." [1]

[1]: https://www.paypal.com/us/legalhub/paypal/program-banks-tnc

> They can lock you out of your account and your money at any time and leave you going in circles

All very true, but banks are doing exactly the same thing, all while following banking regulation: https://news.ycombinator.com/item?id=38150606

What’s odd is that Germans LOVE using PayPal. The pseudo banking system that PayPal offers is apparently light years ahead of traditional banking in Deutscheland.

It was faster until a few days ago.

Now instant payments using SEPA are mandatory and rolled out everywhere.

The banking system is fine. It’s just that credit card use is not very widespread in Germany. PayPal (linked to bank accounts) is then fairly convenient online.

seriously. given how sellers and creators have had their accounts locked and sometimes not gotten their crap back. it would be unwise. if your going to buy crypto on paypal make sure they let you forward it to your own wallet.

What's the problem with debit cards?

Debit cards generally have less recourse for fraudulent transactions compared to credit.

I always keep a few bucks on the PayPal card to forget about until the next time I don't have my card and I'm like, "oh shit I have enough for a beer on this bastard" and it's like a mini-Christmas.

The thing that gets me is the 40% cash back on Walmart purchases up to 500$. It's such an incredible incentive it has to be shady af. Are the Rand oligarchs trying to buy out the poor? We'll never know because poor people don't have PayPal accounts.

"A something-or-another big enough to give you everything you want is a something-or-another big enough to take from you everything you have." -Voltaire

Why does their support being "offshore" matter at all? If they wanted to provide good, user-friendly customer support, they would, regardless of where the reps are?

Offshore support is unloved and powerless. They can't and won't fix any issue. They exist to fulfill the obligation to provide support in the cheapest form possible.

> If they wanted to provide good, user-friendly customer support, they would

Has this been your experience with PayPal?

They marked my account as hacked (it wasn't), and the first two submissions of a photo of my driver's license from my phone were rejected... not until the third time after calling the third operator was like.. yep, that's a driver's license with your name on it.

That's not even close to the worst stories I've heard... like running Rippa through the ringer.

Fair enough, maybe "outsourced" would be a better way to put it. Basically they want support to cost them as little as possible and do not particularly care whether it actually offers any useful help to customers.

More specifically, their support cannot actually do anything to resolve problems. They read off what their computer screen is telling them. They can't take any actions to fix things.

Because it's offshore so it would be cheap, which already provides a metric that is being optimized.

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