The Paypal Scam Continues

Paypal seems to be leaking into other areas of ecommerce. It is not just for ebay junkies any longer.

Have you noticed, though, the growing number of people no longer accepting it? I just went through an experience (to be kind) which explains why disenchanted ranks continue to grow.

For those unfamiliar, paypal is an ingenious service that makes buying and selling on the Internet relatively painless, does not charge a fee unlike credit cards and allows sellers to ship sooner than if they had to wait for a check to arrive and clear.

How do they make money, you ask. Just like traditional financial institutions, whether banks or investment houses, make money on the 'float'. This is the time between when your money is received by the institution until it is released to the payor (the seller in the case of e commerce). Services like paypal take usually 48 hours to 'clear' the funds owed to the seller. These are 48 hours (at minimum) they are making money on your money. It gets better!

I recently rented one of my investment homes to a family moving to Reno from out of town. As both parties are tech savvy, we decided to use paypal to make it easier on both sides. Silly us. Both of us have been using paypal for years, for purchases from $10 to several thousand dollars without incident. Until now. Paypal notified both parties of a pending 'investigation' into the transaction. We needed to provide additional info and this 'investigation' would take about a week. I did what they required and then decided to do a little 'investigation' of my own. What I uncovered seems to be the reason so many are no longer using their pal.

Keep in mind, that paypal handles millions of dollars of transactions a day, nipping at the heals of the incumbent credit card clearing houses. Unlike the credit card companies, they are satisfied with making their profit on the float. To make extra profit, the number of 'investigations' have been growing as exponential as their customer base. The more people that use the service, the more then can play the float game with unsuspecting buyers and sellers. They only need to do it once per new subscriber to increase their income 3x to 4x. Good work if you can get it.

So, my friends, another example of nobody does anything for free!

Caveat Emptor!