If you’re an online business who uses Paypal as their third party payment processor, there is a danger lurking which could cost you dearly. Know as instant bank transfer, this option lets buyers withdraw money direct from their bank account, to pay for goods or services they have bought. According to Paypal, it’s exactly what it says, “instant”, but beware, because it’s far from instant! It takes Paypal around 3 -5 working days to take the money from buyers accounts, and if you have sent the goods or delivered the service, and there is not enough money to fund that transaction, your going to be left in the cold.

Let’s just say you sell watches on eBay, and you wake up one morning to find that someone has bought an expensive watch for £120, you check your Paypal account to see the money has been put into it, and there it is, clear as day “Payment Completed”.

Great! You think, and post the watch off that day recorded delivery. The watch has been delivered, payment is in your Paypal account, and both buyer and seller exchange good feedback. Six days later, you log into Paypal to find that £120 has been removed from your account; you contact Paypal to find out that when the transaction did finally go through, the buyer didn’t have enough money in their bank to cover the transfer! What was supposed to be instant has taken around six days, you’ve sent the goods off, and are now out of pocket.

Fortunately for you, the buyer has received an email asking to clear their negative account within 60 days (60 days!!) or they will be suspended from using Paypal, and has made a payment using a credit card, which goes straight to your account and sorted this ugly mess out within minutes. But, what if the buyer sat back and thought about not paying, what if they weren’t bothered if they used Paypal again? What if they couldn’t meet the payment due to some unfortunate incident?

Here’s what probably would happen:

The seller contacts the buyer to arrange payment, and the buyer can’t get the money together, he doesn’t want to send the goods back, and asks for a delay in payment, promising that they will pay you at the end of the month. You wait and wait, no payment. In the meantime Paypal has suspended the buyers Paypal account, so now they can’t even make a payment even if they wanted to, unless they post a cheque or postal order to somewhere in Ireland! That would probably take another week or so to reach your account, and of course, you might not even get paid at all! Your £120 down, minus an expensive watch, and furious with Paypal for letting this happen, and you know what, there is absolutely nothing much you can do about it!!

You see Paypal isn’t a bank, and it’s not covered by any banking laws, they can do what they want, when they want, how they want, to a certain degree. All Paypal allows users to do, is pass money on from one person to another, electronically, and with millions of people using it, its obviously a trusted company.