Don’t Use PayPal

This is my message: Avoid paying for things using PayPal or Google Checkout.  It’s always a good idea to pay for anything you buy online by credit card, so you get protection under the Consumer Credit Act if anything goes wrong.

I won’t pretend to like ebay (owners of PayPal) but I do have a soft spot for Google. Nevertheless, there are very good reasons why you should avoid using Google Checkout and even more to avoid using PayPal.

The main one is that they are middle-men, adding another layer of complexity to your transaction. For an example, look at, now owned by BT (and with the poor customer service you’d expect of a BT company),  or, online computer & electronics retailers . They both accept payment via PayPal, Google Checkout and their own checkout.

When you pay directly by credit card (ie using the company’s own checkout) the company requests the money from whoever handles their credit card payments, who request it from your bank.

When you pay by PayPal, PayPal request the money from whoever handles their credit card payments, who request it from your bank and then pass it on to the retailer. This has 2 implications; it could lead to higher prices in the long term, and it’s riskier for you in the immediate term.

Pushing Up Prices 

You now have an extra link in the chain, meaning an extra middle-man out for profit. This inevitably means the more widespread PayPal usage becomes, the more prices will be hiked up to pay off the extra middle-man. On this part, the same is probably true of Google.

Losing Protection

There’s another reason not to use PayPal though, and potentially much more important. Because it’s PayPal that actually receives the payment from your credit card, what you’re actually paying for is not the goods you order from (or whoever else). What you’re paying for is for PayPal to send money to the retailer. This means that even if the retailer never sends you anything, they’ve completed the transaction just by giving them the money and so you will most likely not be able to dispute the transaction through your card issuer or bank (I don’t think this applies to Google Checkout purchases, but I’m not 100% sure). Instead you have to take the dispute up with PayPal – and that’s never a pleasant experience for anyone. Let’s just say they’re not famed for their customer service.

The strangest thing is that most of the sites that accept both PayPal and Google Checkout (like those mentioned above) also have their own checkout, where you pay by credit card and the payment goes straight to the seller.  So why risk losing the protection?

Author: nerd.

An experienced IT professional, I used to run a number of small websites and spend a lot of time tinkering with my sites or my PC - back when I had free time.

9 thoughts on “Don’t Use PayPal”

  1. I used google checkout about two months ago (hadnt neard of it until then) to buy a new HD from dabs. Saved £5 in doing so. But you make good points.

  2. You don’t know what you are talking about, do you?
    Merchants have to pay fees for receiving CC payments too. So it doesn’t make a big difference for them if they pay the fees to PayPal. And if you make a PayPal-payment by CC, it doesn’t affect your right to make a chargeback. You can of course make a chargeback, PayPal will then try to fight it (on behalf of the seller), if the seller can provide proof of delivery. In case the chargeback case is lost, then the seller looses the money. Not PayPal! So there’s no reason for you to tell other people not to pay by PayPal. It’s a safe and easy way to pay for goods you buy online.

  3. I’m not an expert but “don’t know what I’m talking about” is a bit harsh when your own rationale is so simplistic.

    Yes, merchants have to pay fees to receive credit card payments, but for high-volume traders these are much, much lower than PayPal fees (50p per transaction on debit cards I believe, compared with about 2.4% on PayPal). I’d imagine, though could be wrong, that PayPal have to pay the same fees to the card companies and then add their own margin on top – hence there’s an extra middle man. I suppose PayPal could act as their own merchant (or maybe not, I’m not quite sure) but either way their fees are much higher and those fees will be passed on from the seller to the consumer whether transparently or not.

    Also, as regards chargebacks, PayPal can dispute the charge back and you’re not protected by law the way you are with credit cards and you don’t have the courts for recompense. Also, PayPal’s dispute system is awful – they apply their own rules rigidly regardless of who is actually in the right or wrong. That and they do everything they can to avoid actually having to manually intervene in disputes – that I can say from personal experience.

  4. One reason for using paypal or an equivalent is to cut down on the number of companies that hold my credit card details. If I buy stuff from ten different websites then ten different companies now hold my credit card details and it only takes one to have lax security for my credit card details to be compromised. When you read the on-line security policies of some companies all they talk about is using 128 bit ssl certs,
    so while they may have a good website for show casing their products they obviously have a poor grasp of security. So rather than miss out on those products I’ll trust my credit card details to paypal or google as they are huge companies that would be finished by a credit card database breach.
    The extra fees that paypal / google charge the merchant as a middle man would be covered by the savings the merchant could make by not worrying so much about the security side of dealing with credit cards.
    I hadn’t considered the issue of credit card purchase protection ( does this count with debit cards) but on reflection I’d rather an item didn’t arrive than have to worry about I.D. fraud due to my details being in a compromised database at some small web shop.

  5. What makes you think that your CC info is any safer with PayPal ? And yes, I agree with ‘Nerd’. You don’t want to add more complexity to your billing process, especially if something goes wrong. PayPal is just a middle-man company out for a buck. If you can, avoid it. There’s always risk using your credit card online… that will never change.

  6. I strongly disagree that your CC is saver with PayPal because I had a new CC and never used it at all and there was no way that anyone would of found my CC and used it. BUT after one week of using my CC with PayPal on eBay and one other website I had 8 PayPal transactions form my bank account from PayPal. These were not fees or anything but things goods and services. After having enough problems with PayPal & eBay I no longer use them and I suggest you do the same. Do keep in mind that it is only a matter of time before you get scammed by them. I thought it would never happen to me because of the their protection but I was so wrong. PayPal done nothing and I had to report this to my banks to get my money back

    So no I have a small business I will shell out the set & monthly fees with Worldpay as at the end of the day the fees work out to be the less and I don’t get scammed. I was also thinking about using Google checkout but I must admit I am not to sure after reading the above comments as they could be another PayPal in the making.

  7. Dear readers,
    I did a AUS550.00 worth transaction through the ebay-paypal combination. But I didn’t receive my item. I opened a case at PayPal. After about 1 month period they said, the seller has proved the accuracy of the transaction and and they can do nothing about that. Further they have asked me to take security precautions before buy an item. Finally I lost my money. Eventhough they are shouting about the buyer’s protection policy, they do nothing when something happend. Always they take the seller’s side because of their income. So you better do not risk your money by doing transactions through the PayPal.

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