Is your PayPal account frozen?
You’re not alone.
A simple “paypal account frozen” Google search will show you that tens of thousands of online sellers are facing the exact same thing…
...and it all boils down to PayPal being paranoid that you’re a “fraud risk”.
The good news?
Your money isn’t about to disappear into cyberspace anytime soon.
You can get in touch with PayPal’s Resolution Department to get your account unfrozen; it might take up to a few months, but the majority of online sellers do get their money back eventually!
Whilst you’re doing that, be sure to read up on why PayPal freezes accounts in the first place.
Once you understand PayPal’s “triggers”, you can steer clear of these in the future, and make sure that you don’t ever get your account frozen again.
Let’s jump right in!
Contrary to what some online sellers seem to think, PayPal doesn’t hate you.
It doesn’t have a personal vendetta against you.
Nor is it colluding with one of your competitors in a conspiracy to disrupt your business.
PayPal, simply put, is trying to cover its own ass everytime it freezes, limits, or locks an account.
Here’s the rationale behind it:
If you exhibit certain types of behavior with your PayPal account, you might potentially be engaging in fraud. Now, PayPal doesn’t know for sure if you are - but it’s not going to take its chances, and so it freezes your account.
Ever heard of the saying, the best defense is a good offense?
That’s exactly what’s guiding PayPal’s frozen funds policy.
Now, there’s a long list of triggers that can result in your PayPal account getting frozen, including...
But by far, the most common factor that results in sellers having their PayPal account frozen is…
Receiving an uncharacteristically large sum of money in your PayPal account.
This is how the situation might play out:
Let’s say you own an eCommerce store, and you sell electronic accessories such as earphones, laptop chargers, and memory cards.
Your average basket size is $40 - which isn’t super high, so you decide to branch out and start selling actual electronics as well.
You source for your products, put up the new listings, and amend your returns policy.
A month later, you’ve made your first sale for a big-ticket item on your website - a laptop!
Your customer pays $2,500 for his purchase via PayPal, and before you can even think of withdrawing it, your PayPal account has been frozen.
On PayPal’s end, here’s what they’re thinking:
This guy has been getting payments ranging from $10 - $80 for the past year, and he’s suddenly receiving a $2,500 payment? That’s odd - who knows what he’s up to? We’d better freeze his account before he can get up to any major mischief.
I know. It sucks. But hey, I don’t make the rules.
Other than having their accounts being frozen because of uncharacteristically large payments, many sellers also experience the same when they receive a series of chargebacks, disputes, or claims to your PayPal account.
We’ll discuss these in detail in the next section!
Essentially, these are all buyer-initiated complaints that we’re looking at.
First up, let’s talk about disputes.
Buyers may contact sellers through PayPal’s Resolution Center site to file a dispute; when this happens, both the buyer and seller should work together to find a solution.
The vast majority of disputes typically fall under two categories - Item Not Received (INR), and Significantly Not As Described (SNAD).
If the buyer and seller are unable to agree on a solution, either the buyer or seller may escalate the dispute to a claim.
If the buyer files a claim, the seller will need to respond within 10 days. If he/she does not do so, the claim will automatically close in the buyer’s favor, and PayPal will issue a full refund to the buyer.
If the seller does respond, however, PayPal will step in to investigate the matter based on the information they’ve been provided.
This usually takes approximately 30 days, and the outcome will be decided by PayPal on a case-by-case basis.
So that’s disputes and claims - how about chargebacks?
These refer to when a buyer asks their credit or debit card issuer to reverse a transaction after it’s been completed. (Obviously, these can only be initiated by buyers who paid with their credit or debit card).
Chargebacks are kinda tricky - there are many reasons as to a buyer might initiate these.
Yes, a buyer might request for a chargeback if they didn’t receive their item, or if they receive an item which is significantly different than described.
But that’s not all:
A buyer might also request a chargeback if their credit card was used to purchase the item without their permission…
…or if they simply don’t recognize the charge on their credit cards.
Digressing a little here:
It’s super important to update your Credit Card Statement Name, so that your buyers recognize the charge they see on their credit cards.
If your Statement Name isn’t even remotely related to your business name, you can’t blame your shoppers for being confused and requesting for a chargeback!
Back to the topic at hand…
Once a shopper files a chargeback, you’ll need to respond within 10 days.
That doesn’t mean the situation will be sorted out with 2 weeks or so, though. The entire process might take 75 or more days to be resolved; the specific time frame is determined by the credit card company that your shopper uses.
Again, it sucks, but during this period of time, the funds in your PayPal account might be frozen.
Now that we’ve gotten chargebacks out of the way, let’s talk about bank reversals.
Bank reversals, or ACH returns, occur when PayPal receives a request to return funds for a transaction that was funded by a bank account.
This request might be from the buyer or the bank; it’s usually filed when a buyer or their bank either suspects or discovers that someone has accessed the buyer’s account without their permission.
When this happens, you’ll have between seven to ten days to provide all the relevant information you have about the transaction. With bank reversals, the bank will be the one determining the outcome of the case.
Right, now that you’re an expert on disputes, claims, chargebacks and bank reversals, let’s move on to talk about what to do when your PayPal account is frozen!
When you have a frozen PayPal account, the first thing to do is to access the Resolution Center.
Once you navigate to this page, you’ll be able to see the steps that you need to complete to get your account reinstated.
In most cases, you’ll have to fax documents to PayPal.
Commonly requested documentation include:
Once you do that, sit tight and wait for Paypal to get in touch with you.
In most cases, PayPal will email you within 24 hours to let you know that they’ve received your information.
After a few more days, they’ll email again to let you know whether your account has been reinstated.
If that’s the case, whew! You dodged a bullet there.
If not, here’s where things get complicated.
PayPal will either ask you to provide them with more information, or simply tell you to wait 180 days before you get your money back.
Either way, you can try your luck speaking with their customer service reps on the phone, but most sellers who’ve had their accounts frozen before say that this is pretty useless.
Pro tip: There are some sellers who even say that if you get frustrated with PayPal staff (be it via the phone or email), it’ll automatically result in your money getting frozen for the maximum duration of 180 days.
Bearing this in mind, make sure you keep your temper in check whilst speaking to anyone from PayPal. You can vent all you want once you’ve hung up the phone, but hold your tongue whilst you’re still on the line!
This brings us to the next question...
There’s no way of making this less unpleasant, so I’ll just come straight out and say it:
Yes, that’s an insanely long amount of time, but unfortunately, it’s completely within PayPal’s right to do this - just check the Terms of Service which you agreed to.
There’s nothing you can do about this, other than to suck it up and move on…
Obviously, you should also learn from this experience, and make it the first and last time you get your PayPal account frozen.
First, restrict yourself to making only small withdrawals of cash from your PayPal account.
Secondly, check with PayPal to ensure that your account doesn’t have a limit in terms of the amount of money you can receive per day. (This is especially important if you don’t have the best credit - PayPal might’ve placed certain limitations on your account, without specifying these to you!)
If you’re expecting to receive a huge sum of money (maybe you’re launching a new product line, or you’re running a crowdfunding campaign), call PayPal and pre-empt them about this.
Also, ensure that the addresses, phone numbers and names on your bank account, credit cards, and PayPal account are a complete match.
Last but not least, if you ship physical goods, always use trackable shipping methods so that you can provide documentation when it’s requested for.
Having your PayPal account frozen is not fun…
But despite its flaws in this department, PayPal is still (arguably!) a pretty good payment gateway provider for online sellers.
For one thing, it’s ridiculously easy to set up your PayPal account (pass my 70 year old granny a laptop, and I’m pretty sure she can get it done).
Also, PayPal is a recognized brand which is used widely around the globe. In many economies, shoppers equate the PayPal logo and trust badge with legitimacy!
Bearing this in mind, it’s understandable why many sellers choose to overlook the shittier aspects of PayPal, and use them despite their inadequacies.
But at the same time, you don’t need to pigeonhole yourself.
If you want to look into collecting payments through other platforms, there are definitely more options on the table.
It’s your call!
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