eCommerce Blog / My PayPal account is frozen - help!

My PayPal account is frozen - help!

Q: Help! My PayPal account has been frozen!

A: PayPal account suspensions have caused numerous problems and headaches for PayPal users, including non-eBay users outside the US who use PayPal to remit project or job payments. The issue stems from a procedure launched during the summer of 2007, called Payment Review. Under this policy, PayPal can identify risky transactions, and freeze these transactions and the corresponding PayPal accounts while it investigates.

Although the policy was designed to reduce fraudulent transactions and protect sellers from scam buyers, thousands of PayPal users have filed complaints over funds being frozen and many have even sued PayPal for disrupting their online transactions.  It was initially estimated that most investigations would be complete within 24 hours, yet hundreds of people have complained that it has actually taken weeks for the issue to be resolved.

How can you avoid your PayPal account being frozen?

While you can’t insulate yourself entirely against this nasty event, you can make a freeze less disastrous by following these precautions:

  • DON’T leave thousands of dollars sitting in your PayPal account - transfer your money out to your bank account every couple of days.
  • ALWAYS keep records of all your transactions in a safe place outside of PayPal. If you do find your account frozen, the first thing PayPal will request is your documentation.
  • Use tracking on all shipments and keep records religiously.
  • Retain proof of all wholesale purchases (especially if selling electronics).
  • Be aware that receiving a large amount of money to a new account, or out of the blue to an existing one, will very likely prompt a freeze.

Should it already be too late, the best option is to get your lawyer to call PayPal on your behalf, or take out a court order. All accounts suggest this is the fastest way to get funds released and your account reactivated.

Some sellers have decided the best thing to do is quit PayPal altogether and get themselves a merchant account. Two excellent options are: MerchantInc and Propay.

The good news is that eBay will be offering Moneybookers and Paymate as additional payment services from February. Hopefully we will soon see the last of PayPal’s overzealous freezing acts!

The Auction Expert

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Comments (1)

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Melanie Smith on 1:12 27 Jan
I was just recently limited and PayPal finalized it as a permanent limitation. Now I cannot accept money since many of my buyers want to pay with PayPal!! Do you have any solutions?

I was reading an article on "Stealth Accounts" by Auction Essistance, but I am hesitant on them. Are they safe? Is it really legal?
Justin Golschneider on 15:28 1 Feb
Hi Melanie,

I would not use stealth accounts. You'll undoubtedly violate rules on PayPal, possibly risk trouble with your country's tax agency, and probably expose your financial information to criminals. It's a better idea to accept as many alternative forms of payment as possible instead.


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