When I first wrote about PayPal's $2,000 spending limit, I must admit I was a bit puzzled by the policy. Why would eBay's payment subsidiary force long-time users to add bank account "verification" to their accounts? Unfortunately, the reasons are becoming all too clear as more readers report what happens when their total PayPal credit card charges reach $2,000.
"I've just experienced -- and become a victim of -- becoming a PayPal Verified member," one reader wrote recently. "After dozens of PayPal transactions now totaling their $2000 limit, my account was frozen with two transactions pending. I had only one credit card account registered with them, because I did not want to submit bank account information or have one accessible for transactions."
To complete the pending transactions, the reader reluctantly provided PayPal information for one of his bank accounts. "It seemed logical that this would be limited to verifying my identity only," the reader wrote. "But upon completing the two pending transactions, I later found that PayPal attempted to draw money from this account. I had only a small amount of money in the account for my protection against misuse. I had no reason to believe my transaction would not be through my credit card as it always had been. So I now have two non-sufficient funds charges and PayPal is defending their actions and will not even change the failed transaction to my credit card. My bank account must remain as the default payment account if I am to remain a member, even though I do not even want it as a transaction account."
The reader realized too late that he had missed one small sentence in the dozens of documents and thousands upon thousands of words that form PayPal's terms of service. "Once you have become Verified, your bank account (Instant Transfer) becomes PayPal's default payment method," PayPal's Payment terms read. The credit card by which the reader had spent $2,000 was now relegated to an alternate payment method he could use only with difficulty.
As many other readers pointed out after my previous story, it is of course greatly to PayPal's advantage to deduct payments from the user's bank account instead of processing the payment as a credit card charge. Processing credit card transactions costs PayPal more than bank transfers, and credit card chargebacks are eliminated. But while it certainly makes sense for PayPal's bottom line, it also means its customers have less protection if goods aren't shipped or in other payment disputes.
And it certainly still puzzles the reader why eBay/PayPal would want to treat established customers worse than new ones. "There is no reason that verification should be associated with transactions like this," he writes. "I feel like they are misusing private and sensitive member information to their advantage and at members' expense. It's interesting - I really felt good about building up my good rating on PayPal with quick transactions and positive feedback. Suddenly, the wagons have circled, and I'm on the outside being treated like the enemy. Too bad."
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