When you start to earn online cash one of the things that you will almost have to have is a PayPal account. PayPal is the main way online to accept payments from customers and affiliate programs. Many people, especially those who’ll be buying products you create and sell using the Seven Dollar Script, trust PayPal because of its long association with eBay. However, using PayPal as your payment processor does come with some risks for the Internet marketer and you need to be aware of them and how to mitigate them to some degree.

No Internet marketer likes to wake up to an email like this…

We recently reviewed your account, and we need more information about your business to allow us to provide uninterrupted service. Until we can collect this information, your access to sensitive account features will be limited. We would like to restore your access as soon as possible. We apologize for the inconvenience

Ouch! This kind of email means that your PayPal account is locked down. You can accept payments from customers and you can’t move money out of the account. Essentially this shuts down your ability to do business online. Generally they’ll ask for information concerning your identity and business model before they’ll reactivate your account.

If you do get this kind of email, be careful. Don’t click on any links in the email because PayPal phishing attempts use emails like this to steal IDs. Instead, login to your PayPal account. This will tell you if your account is actually locked down. If it is the real thing, then you’ll need to work with PayPal to restore your account. This can be a frustrating exercise because of PayPal’s less than stellar customer service.

Why Does PayPal Shut Down Accounts?

There are several reasons why this happens but most center around an account raising algorithmic flags that trigger a manual verification of the account. What can trigger this? Well, there’s a whole laundry list of things that PayPal doesn’t allow that you’ll find in their terms of service. Since these can change frequently, it’s a good idea to check on them from time to time to insure that you aren’t unintentionally violating any rules or even getting too close to the edge.

Perhaps the biggest reason accounts can get locked down are large money transfers that occur suddenly. For example, if you’ve been making a $7 sale here and there and suddenly you have $2000 or more come into your PayPal account in a few hours due to a highly successful product launch. This trips a flag and your account is locked down.

Another reason is when there’s a violation of the PayPal TOS. For example, funding purchases or money transfers related to gambling, multi-level marketing (MLM), adult oriented materials, pharmaceuticals and many other things violate the PayPal TOS. Even giving the appearance of being involved in activities like these can trigger a lockdown.

Another common violation of the PayPal TOS is requiring a customer to complete an opt-in form before getting access to a product they’ve purchased. Another one that affected $7 Script sales early on was selling it more as a business opportunity than a product but a slight rewording took care of that problem. A large number of chargebacks or other payment problems can also trigger a shut down.

New accounts, unverified accounts, personal accounts or accounts with a limited track record seem like they are more subject to lockdowns. However, even established accounts can get locked down by their algorithms. It is best though to establish a good track record of successful transactions using a premier or business PayPal account. This seems to give your account a higher threshold but just how much is uncertain in order to prevent people from gaming the system.

The bottom line is that PayPal has to comply with a lot regulations related to money transfers and consumer protection. While they aren’t a bank they still have to comply with US federal and state laws concerning money transfers. This includes tough drug enforcement laws and the infamous Patriot Act and other anti-terrorism laws. They also have to contend with regulations from Visa and Mastercard. Since their business model is built around accepting many people who could not otherwise qualify for a merchant credit card processing account this has led to them enforcing their terms stringently and with lack of transparency. Could PayPal’s customer service be better, sure, it could. But you have to consider what they’re up against in terms of regulations and fraudulent transactions.

What Can You Do To Avoid a PayPal Account Shutdown?

The obvious thing to do is to establish a good, long term, track record with PayPal. This would include having a fully verified premier or business account that’s been established for some time and that has a many buy and sell transactions. You should also make sure that you follow the PayPal terms of service to the letter and don’t push the envelope. If you’re doing a product launch that might bring in a sudden influx of payments, contact PayPal ahead of time and let them know. This can help prevent an unexpected shutdown.

I haven’t had any problems with PayPal myself and I’ve had my account with them for quite some time. However, other people I know have encountered significant problems. For them and others who don’t fit neatly within the PayPal model, there are alternatives. You do have to consider that consumers tend to trust PayPal more than most other online credit card processors. Also if you’re operating in the Internet marketing arena people often pay for products and services directly from their PayPal account balance. Not accepting PayPal payments may limit your customer base and thus your business.

PayPal Alternatives

If you have decent credit and a business banking account you may want to consider a traditional credit card merchant account that includes an online processing option. This will typically cost you a monthly fee plus a per transaction fee at about the same percentage as PayPal’s so it may end up costing you more unless you’re doing a high volume of business. You will also have to comply with tighter regulations but, on the flipside, you’ll probably receive a lot better customer service.

There are other online payment processors around that are trying to compete with PayPal that you might consider if your business model puts you at risk for a PayPal shutdown or violates the strict PayPal TOS. Just bear in mind that these processors have the rules and regulations as well that you will still need to follow in order to avoid problems.

AlertPay was primarily set up as a way to handle Multi-Level Marketing (MLM) payments since PayPal prohibits them. They’ve been seeing a lot of business beyond that from Internet marketers who’ve become frustrated with PayPal’s rules and lack of transparency and customer service. E-junkie.com and TrialPay.com are other alternative payment processors for those wanting to avoid PayPal. Digital River and 2Checkout.com are, from what I understand, good alternatives to PayPal from more traditional ecommerce sellers. They have also been working toward picking up smaller clients who’re dissatisfied with PayPal.

I hope that this article has helped you understand a bit more about using PayPal in your effort to earn online cash.

Frank Carr January 16th, 2009 Earning Money Online

Earning Money Online
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