What's the best way to handle PayPal?

[John Morris]

Hi David Kirkby,
  Thanks for your quick response.

> My worst ever nightmare was buying a portable vector network analyzer for about $17,000 from the test equipment division of Agilent via eBay.  There were all sort of firmware issues with this, and then a hardware fault. I'd lost all confidence in the unit.  Agilent agreed to take the item back for a "full"  refund. The problem was that by the time this was all sorted out, it was outside the period that PayPal accepted refunds (it was 90 days, but I think its now 180 days).

 I almost never deal at the same order of magnitude as you. Also, my worst experience with PayPal was a little different from your experience with Agilent. I purchased an item for about $500 on eBay from an individual seller. The item was plainly not as described, so I immediately requested a refund. The seller was nowhere to be found, so I initiated the claim process well within PayPal's limit. However, because the seller was unresponsive, PayPal simply rejected the claim, leaving me high and dry. Naturally, I next contacted my credit card issuer, who promptly issued a refund at PayPal's expense.

  This left me with a useless item, but I had my refund so I went back to business as usual. Several months later, I happened to sell an item on eBay and I naively accepted payment through my only PayPal account. PayPal then froze the account without warning and demanded satisfaction for the months-old purchase.

  The story does end happily: I had not gotten around to discarding the useless item, so I was able to negotiate a settlement whereby I shipped it to PayPal in exchange for my frozen account to prove that the item really was not as described. In the end, I was out only the return shipping fee, which I would have accepted originally. This is the lesson that taught me to keep my buying and selling accounts separate.

> 5% was a round number, but it is certainly higher than what you describe. PayPal charge more for international transactions, which most of mine are. Some recent examples
> 
> From the UK:
> 1) Received £335.00 from the UK - fees were £11.59, which is 3.46%
> 
> From outside the UK:
> 2) Received £35.00 from the USA - fees were £1.74, which is 4.97%.
> 3) Received £295 from the USA - fees were £13.18, which is 4.45%
> 4) Received £740.00 from the USA - fees were £32.76, which is 4.43%

  I see. That is a bit more than we pay. We pay $30 per month for use of the virtual terminal so we can process credit card numbers given to us over the phone. That fee is not tied to the amount of money charged, but it works out to about a third of a percent for us. However, close to 70% of our payments come in through our website. For those payments, PayPal's new fee structure charges us a flat 2.9% plus $0.30. Close to 15% of our payments come in by phone, for which PayPal charges a sliding scale: 2.9% plus $0.30 if last mont's total sales were below $3,000, 2.7% plus $0.30 if last mont's total sales were between $3,000 and $10,000 and 2.4% plus $0.30 if they were above $10,000. Finally, international sales account for another 15% of our sales. For these, PayPal simply adds 1% to whatever the fee would have been had the transaction happened fully domestically (3.9%, 3.7% or 3.4%). Over the course of a year, this all works out to between 3% and 3.3%, depending on whether our sales are high or low for the year.

> Where I think I can gain a bit, is if I start selling more in USD, then get paid in USD. Then I keep those dollars there to pay for items from anyone that wants paying in USD. It will save a fair bit on currency conversions.

  It does sound like this could be worthwhile if you are both processing and spending significant amounts in USD. However, I think you could only get the lower fees we are experiencing if you had a US physical address and US tax ID.

Best,
John