I run a (very) small business, with many of my customers paying me via PayPal. I’m very wary of PayPal due to any number of horror stories,, so periodically I move money from my PayPal account to a savings account at one bank via ACH transfer, and then I do an ACH transfer from that account to my main checking account at a different bank. I try to keep that first account close to empty most of the time; since PayPal has the routing/account # for that first account, I have always figured that they have the capability to pull money back out of that account if they become capricious or get hacked, and that this two-step transfer process keeps them one additional step away from my real checking account, which contains more substantial funds.
So am I right? if PayPal has a routing and account number for me, do they have the ability to pull money from my bank account?
To take money from your account legally, they need the account information that they already have plus an authorization from you to do the ACH debit. This authorization can be a blanket authorization done at the time you created the relationship between you and PayPal.
While I am not positive of the current situation, it has been my understanding they can do this. Note they follow a specified procedure for dealing with conflicts between buyers and sellers–so I don’t this is going to come as a complete surprise except for fraud situations.
What type of transactions do you do: large number of small transactions or a few big transactions? I don’t see why there would be a problem unless you do big transactions.
Not sure which transactions you’re talking about. My sales transactions are on the order of $15-$150 each; my transfers to my own bank account are on the order of a couple thousand dollars at a time.
I use PayPal all the time for making purchases and I rarely maintain a PayPal balance, so yeah, they take money from my account all the time, which I knew I was agreeing to when I signed up.
And yes, I have a separate bank account that I use for all online activity including PayPal and I go so far as to have it with a different bank than my personal checking and savings accounts.
If I’m understanding things correctly, the OP has three bank accounts. Paypal; **Clearning **(referred to as a savings account in the OP); and his/her primary Checking account.
OP receives money into the **Paypal **account.
OP requests the Paypal account to transfer money to the Clearing account via ACH transfer. To do this, Paypal has and uses the Clearing account’s ABA and account number.
OP requests the Clearing account to send money to the Checking account. The Clearing account will have the ABA/account number for that, but Paypal does not.
I assume ToS means that Paypal can put/pull money from the Paypalaccount the easiest.
Absent specific authorization/transfer, can Paypal withdraw money from or otherwise freeze/interfere with the Clearing account? Is there something within Paypal’s ToS that would cover a blanket authorization?
If the Clearing account is empty, can Paypal automatically (i.e. without court or OP intervention) reach the Checking account? Or is the OP safe in thinking that being twice removed from Paypal’s system will largely protect those assets from Paypal’s unilateral action?
This mostly covers what I’m asking. I also wonder about the possibility of hackers obtaining my clearing account info from PayPal and using it to transfer funds out of that clearing account.
Almost all ACH agreements give the depositing party the right to also draft against that account. It is normally used when the depositor, in this case PayPal, makes an error. The way the agreement is worded, however, does not limit them to correcting errors. They could, in theory, send an ACH debit to your clearing account at anytime and for any amount. If the balance is not sufficient to cover the debit, the clearing account would either be overdrawn or the bank would reject the draft as insufficient funds.
As for hackers - if PayPal stores the data in electronic format it is vulnerable. Hackers could get the info for your clearing account and drain it (but not your other accounts). I have no idea how good PayPal’s data security is.
I have an ebay business that does about 1000 transactions a year and my checking account bank deposit level and ebay transaction size is more or less identical to yours. I do not use an intermediary bank to buffer my primary checking account as the hassle factor in constantly monitoring and draining it to another account (in my view) would be a time wasting PITA based on the risk levels involved.
For a bad guy to reach into your paypal account would require them to know your paypal login and password and security questions which will challenge them if they are posting from a new or unfamiliar iP address. The main risk to you is PP pulling back a paid transaction because the buyer claims the purchase was unauthorized or by someone who has stolen their ebay info and/or credit card etc.and used it to make the purchase and initiates a chargeback with their credit card company.
I’ve had a literal handful of these claims over the past 14 years and over 5000 transactions of selling online with ebay and Paypal has protected me in those few instances against chargebacks IF it was a valid ebay ship to address and I had shipment tracking to prove delivery. If you do not have those squared away you are SOL.
More common but still quite rare is where PP will “lock” funds because (for whatever reason) they think the buyer is fraudulent. If I have shipped PP has protected me on those transactions as well. If you have not done so already I would encourage you to upgrade to a PP “merchant” account it has a lot more tools and can be somewhat lower cost fee-wise based on transaction volume.
I haven’t seen PayPal’s ToS, but I’m sure it has language allowing them to reverse credits as the ACH system has specific codes for dupe payments & reversals. I’d also guess their ToS gives them the ability to debit you for things like disputed payments. However, if you don’t have money in your clearing acct, your bank would reject their debit request as R01/NSF. Paypal can try to send it again to your clearing account, or just leave it as a debit in your PayPal acct, to be settled when you make your next sale.
If you don’t have anymore sales, they would probably close your acct & either write it off or come after you thru the legal system, depending upon how large the debit is. Paypal would not be able to debit your checking account directly anymore than if you used the overpayment to buy anything from clothes to a new car they wouldn’t be able to repossess those items themselves.
The problem with that is that “cut ties and go” strategy is that paypal is a growing portal for small to medium range online transactions. If you forego paypal you are costing yourself a big chunk of online sales and if your business is on ebay you’ve effectively nuked it. If you stiff paypal you have better have a different address, bank account, and business name to start over with and, this is critical, if you do this to a PP account linked to your ebay ID you will probably have to start over with a new seller ID name and will lose all your accumulated feedback which is huge for buyers trusting you.
The risk of PP tying up a few hundred dollars at some point vs losing access to the service by defaulting is not a smart business move.
I sold an item on eBay and the buyer contested the transaction as he wasn’t satisfied with the product. PayPal pulled the sales value right out of my account and held it as a neutral party while we resolved the case.
As I had already moved the payment elsewhere, they overdrew my account to -$250 and I don’t even have an overdraft. The bank just gave it them.
So, yes, they can and they will. They’ll hit you hard if they feel the need.