Young Entrepreneur Tools: Paypal
July 30, 2006 by Adam
Filed under Entrepreneurship, Internet
First up in this series of tools for the Young Entrepreneur is Paypal (www.paypal.com). When it comes to the internet, the first thing you need (apart from a computer, mouse and internet connection) is a means of sending and receiving money. For every single eBay user out there, and most small entrepreneurs, the easiest and most acknowledged form of payment is Paypal. To quote from their website,
“PayPal allows any business or consumer with an email address to securely, conveniently and cost-effectively send and receive payments online. Our network builds on the existing financial infrastructure of bank accounts and credit cards to create a global, real-time payment solution. We deliver a product ideally suited for small businesses, online merchants, individuals and others currently underserved by traditional payment mechanisms.”
As a result, almost anyone can open up a Paypal account. The tricky part for us youngsters is that we will have to have an adult credit card and bank account for us to be verified on Paypal. This is essential, as by being verified, you can form a trustful relationship with whoever you may be dealing with. For me, I just got my Dad to give in his details, and then I added my own bank account, so I didn’t have to rely on anyone else to help me get started on the net, and so I could use my own cash.
Although sending money requires no fee, there is a small charge for receiving. At the highest tier, Paypal charges a fairly small 3.4% + 20p for us Brits. However this can be lowered if you increase the amount of transactions you do.
The reason I started with Paypal, is that everything you do will require the use of sending or receiving money if you want to make it big on the net. Stuff like hosting and domain names can be bought “the Paypal way”, and receiving advertising or money for jobs can also come in through this method.
Paypal allows you as a starting young entrepreneur to connect with other people, without you having to meet them face to face. What’s more, there’s no need for you to rush off to the bank, as you can withdraw your Paypal balance straight to your bank account.
Unfortunately, Paypal have degraded their name in the few recent years. Many people have complained about “chargebacks” for items bought with a stolen credit card from eBay, and Paypal appearing to place their account on hold and take their earnings. As this has not happened to me, I don’t know how bad the situation is, but there have been some “hate-sites” setup, including PaypalWarning.com and PaypalSucks.com. Bear in mind though, that Paypal does have over 100 million accounts. You decide who to believe!
I would definitely recommend you open a Paypal account with an adult or sibling who is over 18 years old. It will help you establish yourself in the WorldWideWeb, and so long as you are sensible and take all the necessary precautions, there’s not much that can go wrong. Young entrepreneurs need to have a payment system, and I doubt that there are any as cheap, easy-to-use and effective as Paypal.
“I don’t know how bad the situation is”…ummm yes obviously.
If you want to use paypal to buy you are most likely safe. If you use it for selling then rest assured you are in for nothing but headache and financial loss. Paypal makes their money by freezing seller accounts and collecting the interest. A fedral judge has agreed and a class-action lawsuit has been judged in favor of paypal victims. This has not stopped their fraudulent practices tho since it is unbelievably profitable.
Although has over 100 million users the vast majority of those are buyers. It’s estimated that 93% of sellers who have made over $1000 have had their assets seized. The paypal user agreement allows them to do this so if you click ‘accept’ and agree to let them do this then you will get what you deserve.
Jon, it seems like you’ve had a bad experience with Paypal, and thanks for the comment, I didn’t realise the Terms and Conditions of Paypal. I already debated with myself whether to continue using Paypal. However, it is only one of a few services which offer such quick receipt of money.
I didn’t know that 93% of sellers have had their assets seized. Its amazing how Paypal hasn’t been taken off the net yet if these figures are true.
Im forced to continue to use Paypal, unless Google make their Google Checkout unbelievably good value. Otherwise what other reason do buyers and sellers who have had no problems have to make a move away from Paypal?
Also if you could share your “horror” story, that would be great!
Great post as usual Adnan!
I love PayPal, but so far I have mostly used it to pay other people and I have heard alot of horror stories to. But lets face the facts, there must be some reason so many people use them right?
// Andreas Bard
Well my story pales in comparison to many others…there’s about 6000 stories on paypalsucks.com alone. How many others are suffering in silence?
Here’s my story (what I can remember) in short. After selling lots of high-dollar items there were two orders that we were unable to fullfill. Paypal froze my account for the sole reason that the amounts were large (interpret: $$$ in interest for them by ‘freezing’ the account), no one complained about us.
Since Paypal was ‘investigating’ this for such a long period we went ahead and sent these people money orders ($2000 worth!) as refunds. We spoke with Paypal on numerous occasions and told them that these people had been taken care of. The other parties called to tell them this was resolved as well. Even with all this Paypal went ahead and sent these people the money from our account after they had collected their 180 days interest. They got refunded twice, once from us and once from paypal.
We filed a dispute and Paypal asked us to fax in copies of the money orders, which we did. Some time later we called to follow up and they asked us to fax this in again. This went on at least 5-6 times (as is typical if you read threads). Paypal has concluded their ‘investigation’ (did they even contact these people?)…I have been told that I could sue for ‘unlawful enrichment’, but at this point I haven’t pursued it and simply lost the 2 grand.
An article on digg today got me back on this..
http://www.digg.com/search?s=Like+Free+Speech%3F+Paypal+will+close+your+account+for+exercising+it
Paypal can sieze your account for ANY reason according to their user agreement (the real reason? collecting interest) listen to the mp3 of the phone call in that link and you will hear what dealing with paypal is like.
Thanks Andreas - with over 100 million account you’re right - Paypal must be doing something right.
But then when I read Jon’s story, using Paypal for receiving money does sound a little scary! Jon before I started using Paypal I did read up on PaypalSucks, but decided that I had no other choice.
As a seller on eBay, the only other way to accept payment is by snailmail - and this definitely isn’t an effective way of being “on the net”.
I think everyone knows that problems (like you stated) could happen to them. But they just hope that they aren’t in that 93% you mentioned. Is there any way round this from your knowledge Jon? If you immediately withdrew your money to your account, would that counter Paypal’s freezing procedure?
Thanks for sharing that very bad story. I hope you manage to get it back.
If you listen to the phone call on that site, the guy withdrew his money before they even put his account on hold. Paypal reveresed the charges from his bank account and took it back!
The way around this is to get an actual merchant account like authorize.net. Besides the whole thing about paypal being a scam, the fact that paypal is as quick and easy as you say means that ANYONE can do it.
Again forgetting the fact that paypal will steal your money, you could call your article ‘tools any moron can use when throwing any old crap up on the web and begging for money’ (sorry, trying to make a point:-))
A merchant account is cheap and easy these days. Besides avaoiding all of the paypal hassels you will gain a air of legitimacy by accepting credit cards directly.
I hope you will investigate paypal further and dissuade people from using them.
Jon, I was just trying to point out to my readers, that Paypal really is one of the only options out there. Really, everyone (young entrepreneurs especially) don’t have access to credit cards and such so that they can create an “authorize.net” account. I understand that you are angry with Paypal, but really what other choice do we have.
I will just continue to hope that I am not scammed, and if I do, I will know that its my fault for having not used another company, but at the same time, I will have also realised that I had no other choice.
PayPal changed alot when ebay bought them, in my opinion. But like you said, they really are the only smart choice online.
Google Checkout apparently is good, I cant find anyone as of now to help me with my pay pal problem (as in im not old enough), but im still scarred out of my mind of using pay pal
I agree; I’ve used paypal for years and it’s great. Just signed up for a merchant account where they allow people (free) to setup recurring bills/fees for their customers - AWESOME
http://The-Nort-Report.blogspot.com
Hey Brian - yeah that is true, but at the moment there’s no other solution that’s as widely used as Paypal, and most people online seem to have an account. Alex, the Paypal scaryness is definitely over-publicized and it can be very useful - but as you say, you’ve gotta be careful.
Joe - awesome! Just keep wary and you should be safe!