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I do routinely transfer all of my funds to my bank account because of some of the complaints I've read.

I have serious doubts about paypal. I've not used it but the horror stories on these sites are not encouraging. paypalwarning and paypalsucks Most of the stories seem to be vendor is reputable with good history, gets a complaint or chargeback and gets locked from his account for > 3 months. I guess YMMV.

After reading www.paypalwarning.com, then i went to www.paypalsucks.com.

I've yet to be burned, but hey, why take the chance.

• PayPal refuses to address claims made "30 days after the payment but before 60 days of the payment". WTF?
• PayPalSucks.com
• PayPal sucks because it uses USD currency?
• PayPal hates phones

I personally have had nothing but good experiences with Paypal, but I was shocked to learn that there was a dark side to it that many, many people have been burned by. It seems the fact that I've had no problems with Paypal is the exception rather than the rule -- many people haven't been so fortunate.

Some of the problems can just be attributed to "shit happens," but in many cases, Paypal is guilty of out-and-out theft: when they receive a complaint about a single transaction, they often freeze the accounts of everyone involved, and then do everything possible to make themselves inaccessible by phone or e-mail so that the accounts can never be unfrozen. They've just walked away with someone's money. Good job.

Anyway, here are some useful links that have many, many testimonials of bad experiences:

Paypal Warning

Testimonials from above site.

PaypalSucks.com

Based on the testimonials I've read, here are a few ways I can think of to make the Paypal experience as safe as possible.

1. NEVER leave money sitting in your Paypal account. Withdraw it IMMEDIATELY. They will freeze it, or steal it, if they get an excuse to do so -- any excuse will do. Don't be tempted by their "Paypal Money Market Fund". That 1.2% APR isn't going to make you rich. You'd be better transfering your money to your bank where it can't be stolen. They can't steal what isn't there.

2. Try to avoid setting up a bank account on Paypal or giving them your checking account number for any reason. They do everything in their power to convince/force you to set up a bank account, which should give you cause for suspicion. If you give them your checking account number, they can (and will) withdraw the money from your bank account at any time without permissions.

3. If you must set up a bank account with Paypal, contact your bank and tell them NOT to allow Electronic Funds Transfers from Paypal without your approval. Unlike with a credit card, there's no way to dispute EFT charges. Get this in writing from your bank.

4. Check your credit card statement carefully each month, and chargeback any mysterious charges immediately -- but not if you have money sitting in your Paypal account or they have your bank account number, because they will take your money away from you if you do a chargeback. Get your money safe first, then call the credit card company to do a chargeback.

5. Try to avoid using a debit card -- you have no fraud protection, and if the debit card draws from the same account as the bank account you have set up in Paypal, you might run into some problems because of the way Paypal does things. If you have $600 in your bank account, and you try to make a $500 Paypal payment from your bank account, it'll bounce! Why? Since bank transfers take 3 days, Paypal wants to avoid finding out 3 days later that there's no money in the account, so they use your credit/debit card to "secure" the transaction by "locking" $500 on the card and then releasing it after the bank transfer clears. So now, when you've tried to pay $500 from your bank account, Paypal has locked $500 of the $600 in the account, leaving only $100 in the account which will make the $500 bank transfer bounce. The bank will charge you a bounced transfer fee, Paypal will charge you a fee, and you'll be unhappy with the whole situation. Sometimes even when the transaction DOES complete, they still don't release the "hold" on the card for days, weeks, months, or ever.

6. Do not use Paypal for large transactions. Use some sort of escrow service. With the incredible fees Paypal is charging now, it wouldn't be much more expensive.

7. As an alternative to Paypal, consider using E-Gold instead. Instead of dealing in a national currency like Dollars or Pounds, it uses actual physical gold as currency: you actually own a stake in the vault of gold that the company owns, and you can send/receive electronic gold from others as payment. It's very expensive to get involved, though: getting money into an E-Gold account requires you to go through a currency exchange service (E-Gold does not offer this service directly) which generally charge a 15% conversion fee, and 1% of your balance is deducted per year.

The cool thing about E-Gold, though, is that if you buy 5 ounces of gold, you'll always have that 5 ounces of gold in your account no matter what happens to the value of gold or to your national currency. If you spend (for example) $200 on 2 ounces of gold, but six months later the price of gold has risen from $100/ounce to $300/ounce, you'll still have that 2 ounces of gold -- but it'll now be worth $600. Pretty nice, eh? A lot nicer than Paypal's 1.2% APR mutal fund.

Anyway, use Paypal if you have to, but be safe. Minimize the opportunities for them to steal your money. Don't use them as a bank. They're not a bank; they're not regulated as a bank, but they want you to use them as a bank so that they'll have more chances to take your money.

Play it safe, and you should be okay.

paypalsucks.com

Kenny