Why PayPal makes it a chore to pay by credit card
April 16th, 2008 | by mbhunter |My wife and I use PayPal a lot. We buy a lot of things through eBay, and I sell a lot of things through eBay and through other venues. PayPal is a good choice for those who want to be able to accept credit cards but don’t want to go through the hassle of setting up a merchant account.
I prefer paying by credit card through PayPal. I get cash back, and I get all of the other benefits of paying by credit card, like free float, consolidated expense description, etc.
My wife bought something today, and paid by direct debit instead. She usually changes the payment source to credit card, but forgot to this time. It’s easy to do. PayPal does make paying by credit card a bit of a chore.
The PayPal payment options default to the following:
- First, if you have a PayPal balance, that gets hit first. You cannot pay by credit card if you have a balance in your PayPal account last time I checked.
- Second, if there is no PayPal balance, it defaults to a direct debit to your bank account on file. (The “eCheck” option.)
Payment by credit card is never a default, and you can’t set it to be a default. Here are the steps we need to go through each and every time I want to pay by credit card:
- Ignore the bright orange “Pay $12.34 USD Now” buttons on the page.
- Find the Payment Method section, and click on the “Change” link.
- Go back and log into my PayPal account to transfer my entire PayPal account balance to my bank account if I don’t see the credit card option. (It’s free to do this, and I can use my credit card immediately after initiating the transfer.)
- Try again and click on the Credit / Debit card option for payment.
- Confirm that I “still want to make this payment with a credit card” and click the “Yes” button which is right next to a bolded “No” button. (I still have to think each time I click on the Yes button, even after doing it hundreds of times.)
Are you getting the idea that PayPal is trying to trick me into not paying by credit card?
It’s all about PayPal’s bottom line. If a PayPal user wants to accept credit cards, they need to have either a Premier or a Business account. A Personal PayPal account does not allow that person to accept credit card transactions, but there is no fee taken out for receiving money on Personal accounts. However, on Premier or Business accounts, every payment accepted, regardless of source, is charged a fee.
Now, transfers from PayPal balance are free for PayPal, as it’s all an internal shifting around of electrons. Balance transfers direct from a bank account are also free for PayPal, as the bank from which the funds are drawn pays any ACH transfer fee. Payment by credit card, however, is not free for PayPal. PayPal is basically a giant merchant account that fulfills transactions on behalf of about 100 million different user accounts. Each credit card transaction costs PayPal a percentage of the transacted amount plus a flat fee. They pass this on to the premier and business account holders, of course, but they charge the same fee to them regardless of whether it was a credit card transaction or not.
It’s been this way for years, and it’s a pain, and it still catches me once in a while, and it’s not likely to change. Maybe this little guide will help you if you decide to pay through PayPal using your credit card.
27 Responses to “Why PayPal makes it a chore to pay by credit card”
By Mrs. Micah on Apr 16, 2008 | Reply
I hadn’t thought about that much, but it makes sense. Does Paypal allow normal users something like 5 credit card receipts a year? I think I remember that before I had to switch up to premier.
By mbhunter on Apr 16, 2008 | Reply
Mrs. Micah: That’s possible. I’ve had a business account for a while so I don’t remember.
By Brent on Apr 16, 2008 | Reply
This is funny you mention this, I feel absolutely the same way. I have done this a few times while wanting to pay for something quickly. They definately make you go out of your way to pay by credit card!
By Chief Family Officer on Apr 16, 2008 | Reply
That happened to me too, a few months ago. It was the first time I’ve forgotten to change the payment “source” – I understand that PayPal does it on purpose for their bottom line, but boy, was I irritated!
By Trisha on Apr 17, 2008 | Reply
That’s burned me more than once! I plan my checking account sometimes down to the dollar with paying more than the minimums on CC’s. And, when I accidentally choose the default payment option in Paypal (which is VERY easy to do), I have to completely re-strategize my budget and decrease some CC payment amounts.
By The Happy Rock on Apr 21, 2008 | Reply
It really does bug me too since I will use my credit card for rewards on all online purchases.
The warning/information message when you try to use a credit card is also a little over the top in my opinion.
By jdb on Apr 21, 2008 | Reply
We have only linked paypal to a credit card and not to our checking account, and I found that it lets us make up to $2k in total transactions before it demands we “upgrade”. Personally, I’ve heard too many horror stories about them freezing people’s checking accounts to allow them access to ours. So when we hit the limit for credit cards, we simply close the account and open a new one. It’s worked for us so far.
By L@SpillingBuckets on Apr 22, 2008 | Reply
Hey, just found your blog through the carnival.
I totally agree with how annoying this is. I used to have an eBay business and bought a TON of stuff with PayPal. I got really good at remembering to switch to credit cards, but sometimes… and often I was buying things that were expensive so it really hurt when the charge was debited instead of paid for with my business card.
Have you seen the new buttons? Rather than YES and Bolded NO they have “pay with credit card” (normal font) and “PAY WITH BANK ACCOUNT NOW” capitalized and bolded in the confirmation screen.
By Theora55 on Apr 29, 2008 | Reply
I’ve noticed this, and it annoys me mightily. Bad PayPal, leave my bank account alone! I want the protection of paying by credit card, because I don’t trust Paypal or Ebay to protect me from a scam or malicious trader.
By Simon16888 on May 1, 2008 | Reply
I have a personal account with PayPal and I could not find a way to change from bank account to credit card today.
I call Pay Pal and ask the girl can I remove my money on the bank so PayPal will go to next route – charge to my credit card? She said yes but bank might charge me fees.
I guess I will remove my bank account so PayPal have no way to charge to my bank account. With credit card I can get my reward point I can pay the bill few weeks later. There is totally no reason to pay by my bank.
PayPal just don’t want to let their user to set default payment method on our account, they give you choices but take you forever to change it and want you to forgot that you have that choice.
They want cash. They don’t want to pay extra fee.
By acedox on May 8, 2008 | Reply
I have a personal account with Paypal, i created it the last week of April. I linked my Credit Card to Paypal, after getting the 4 digit code i verified it.
I was trying to pay for an online subscription with my credit card through paypal, since it’s the only option that i can choose. I noticed that paypal won’t let me get over $100, I used my credit card in paying my online subscription which totaled to $75, 3 weeks ago. This night i was trying to pay $40, paypal won’t let me, it just gives me the error that i have to log on to my paypal account because of the transaction details, I tried logging on to my account but it won’t let me. I tried 40 times and it didn’t let me with my credit card. After the 40th attempt it gave me the error that my credit card can’t be used in that transaction. I called citibank, and asked about my previous transactions, they said that i had 40 transactions with a charge of 1 with no currency, I’m assuming that they charged me $1 every failed transaction, is this true? or did i misunderstood the agent that gave me the list of my recent transactions?
By edi on Jun 13, 2008 | Reply
Ha I tried to change my primary email from one email to another that is already on PP. They want my 16 digit CC# to do it – as verification! Are you kidding me?! A CC# to change an email address? I don’t think so. I will cancel the account and open a new one with the email I want. Idiots!
ps
The CS Rep emails me in Nigerian Scam language.
“we are require ring you to …..”
By Joyce Goodman on Jul 1, 2008 | Reply
My experience with PAYPAL is HORRID I am trying to get my Pasword Changed Also I would like to change to change my credit card. I have had my IDENTITY STOLEN and MUST change MY CREDIT CARD
I have tried 5 TIMES to get both fixed. Your info. is hard to understand. I am a SENIOR CITIZEN AND I CAN NOT FIND THE ICONS TO ACCOMPLISH THIS JOYCE GOODMAN HELP
By Matt on Sep 17, 2008 | Reply
I completely agree with you regarding how annoying this policy is. I actually stumbled on this thread while searching for if there is a way to set my credit card as the default payment option. Clearly, there isn’t.
Actually you’re wrong about PayPal charging the fee no matter what, though. There are several merchants that I do business with regularly (that have premier seller accounts) and I know for a fact that when I pay with my bank account, they don’t get dinged the service fee. Maybe this has changed very recently, but I think if you pay via PayPal funds or checking account, there is no associated fee.
By ktz on Nov 6, 2008 | Reply
Not to commandeer the discussion, but something else you all ought to watch out for on Paypal is international transactions (ie, buying ebay items in other currencies / using your paypal acct to store other currencies, etc). Paypal has a WHOLE other set of rules for this game, and they aren’t pretty.
Case in point, I just moved to the UK from the US. Before I left, I decided to list a lot of my stuff on ebay UK (instead of ebay US) to try and earn a few GBPs to give me something to start with once I was here (so I didnt have to exchange dollars right away). My idea was that once I arrived in the UK, I would set up a bank account and add it to my Paypal acct in order to transfer the GBP out; easy peasy, right?
Well, paypal doesnt like that….and again, it’s all about money. Paypal actually will not allow you to add a foreign bank account to your paypal account (I must have missed this in the fine print somewhere).
I called paypal to try and sort this mess out, asking if they could do anything for me such as write me a check in GBP, or similar, anything to avoid having to convert the money to dollars (using Paypal’s lousy exchange rate). They suggestion that I open up a UK paypal acct, add my UK bank account to it, then transfer the funds to myself. Seemed easy enough, so I did, and when I tried to transfer the funds (from me US to me UK), I got hit with a huge fee! (something like $60 on the amount I was transferring).
I decided I was not going to take that lying down, so I refunded the money to myself and this sent up some kind of red flag with paypal, who in turn suspended both my accounts. When I called them to ask them what was going on, I was appalled at their inability to do anything about anything. After going through the rigamarole to unblock my accts, they told me, in the most helpless was possible, that there was no way avoiding the fees. I begged and pleaded, explained that I had been a paypal customer for nearly 10 years now and that I had already payed a fee on the exact money I was tranferring (when the buyer payed me), but even the highest supervisor (they only allow one tier) claimed that there was nothing she could do about it. It was “in the system,” as they say.
I think that’s the strategy, really. Separate the employees who know and can accomplish anything from the customers, so the customers give up before they get anywhere. Bravo, Paypal…..never again.
By Amber S. on Nov 21, 2008 | Reply
I setup an extra bank account with no fees / no min balance to use with PayPal.
Some online banks will offer this, I set up mine through Bank of America / Hello Kitty account.
It came with the cutest debit card, but I don’t plan to store much money in it. Just didn’t want to give PayPal access to my paycheck.
By inverce on Nov 24, 2008 | Reply
absolute sham of an operation… paypal is basically out to take you for every measley penny they can get… and about the employee post i totally agree… because there is no head of staff that we as customers are abel to talk with.. we are subjected to talk to equal employees that are trained to talk us down and always refer to the “SYSTEM”. absolute wank if you ask me..
By Joe on Dec 16, 2008 | Reply
You rock, thank you for this information. I can’t believe how complicated they made this.
By Time for Uncle Sam!! on Jan 1, 2009 | Reply
Time for the government to regulate these crooks who mess with people’s bank accounts. Let me default to my credit card like EVERY SINGLE OTHER MAJOR INTERNET STORE.
Now that the messiah, my man, Barrak is in charge, believe me, things is gonna change.
By Bruce on Jan 7, 2009 | Reply
I had to default on my PayPal credit card (lost job) did not owe them much $$ about 1K.
Question. I am selling what I can on ebay and am accepting PayPal. Can they stop me or take the money??? Not sure in Miami……
By Sparky on Mar 6, 2009 | Reply
This sort of misdirection is exactly why I closed my PayPal account last summer.
By Kate on Mar 31, 2009 | Reply
Do you think it is possible to make the credit card your default by removing the bank account after you have added and verified a credit card as backup payment source? I haven’t tried this yet, just thought I’d see if anyone knew anything. Can you remove the bank account if it is the only bank account on the paypal profile?
Thanks
By Kate on Mar 31, 2009 | Reply
Just found something of interest:
“Here’s another key bit of advise though…lets say you add your CC and make a payment, however you forget to change the funding source. By default, the funding source will be Instant Transfer from bank account with a back-up funding source of the primary CC. Due to a recent policy change though, if you call PayPal directly at 1-888-221-1161 within 24 hours of the payment (the sooner the better), the PayPal agent can manually skip the attempt at drafting from the bank and go straight to the back-up funding source of the CC.”
By Marketing Success Entrepreneur on May 26, 2009 | Reply
PayPal is such a great help to most of us that I’ll put up with a bit of inconvenience. Let’s face it: most people treat the money they have in their PayPal account like Monopoly Money: “hey, I still have a balance, so I’ll spend it.” People spend more freely than with their credit card, and MUCH more freely than with a check or cash. So… I’ll put up with the rest.
By Jay on Jun 18, 2009 | Reply
Just tried calling paypal at the 800 number posted above but no dice. they refused even though I called the regular number immediately after I realized I had made the mistake. calling 800-221-1161 help either. I’ll be closing my paypal account once the transaction is totally complete.
By ryan on Jul 2, 2009 | Reply
I was ticked off about this too and found these postings on a google search. It seems that Paypal has now allowed us to change the funding source to credit card, but they don’t advertise it. You just need to go to the Payment Method when checking out to change it to credit card. My concern was that I didn’t have enough funds in my checking account and made the mistake of not keeping track of what was there last month and going into overdraft, costing me $30. So when I just tried to firgure out how to use a credit card with my paypal account, I couldn’t figure it out and found this article.
By Nik on Jul 4, 2009 | Reply
That’s interesting. But would you happen to know, by any chance, why the Payment Method option does not appear when I try to send money? Thanks!