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PayPal's New $20k 21 Day Hold Policy


Well, that's it. Looks like I won't be using PayPal anymore.

According to a letter to the editor of AuctionBytes, PayPal has a new policy in the pipeline which will allow them to hold payments received by account holders. This will affect all those who put less than $20,000 through their PayPal account in a 90 day period. And that includes me! These payments can be held for up to 21 days which would absolutely a lot of business out there.

For example, if I sold 50 items in a 21 day period, but did not receive the shipping money from my buyers due to PayPal holding it, I would have to pay over US$390 in shipping, out of my own pocket! I wouldn't be able to sustain this for long, and my online business would surely crumble eventually. 

In the letter published by AuctionBytes, the author and fellow PayPal member called the support centre to enquire about holds on his accounts He was told about a memo that was circulated among support staff, which detailed the new policy. According to the customer service representative, the fact that he had over 1600 positive feedbacks and 4.8 or 4.9 on all seller ratings didn't mean a thing. The new policy is interested in one number, and one number only, and that's the number of $$'s going through your account. 

PayPal's new policy is apparently based upon their quest to provide buyers with greater security. Their logic is: If the money is held for 21 days, the buyer has 21 days to dispute the transaction, and get a full refund. Although PayPal deny they will be making any interest off the money they would be holding, I find this very hard to believe. 

PayPal haven't yet released any new information about the policy, which gives me some hope that this won't go ahead. What we have found out though, is that last October, PayPal released some new information on their payment holds policy. We can confirm that according to their current policy on payment holds, the amount of money going through your account has no bearing on whether your funds will be held. Also, currently, the holding policy will be used at PayPal's discretion, and will not affect everyone.

 Of course we will let you know about any new developments on this.

As a concluding remark, I will say that the lack of cash flow issues is one of things that makes online retail so great, and so easy to get started in. It's one of the main reasons that so many people can successfully launch online retail businesses with little to no investment. With PayPal now threatening to put all that to an end, I think I will have to add "sign up to MoneyBookers/ProPay" to my to-do list this weekend.

If this new policy goes ahead, what affect will it have on your business? How would you cope with potential cash flow issues?

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8 Comments Add your comment
If this really happens, then GoogleCheckout is really going to benefit. John Reply
I think this is very stupid of Paypal. Paypal does not care about the seller but cares more about the buyers. So what if the buyer scams the seller, has anyone ever thought about that. I hope this doesn't happen because this is going to make sellers really pissed off. Jason Reply
Hi Great information about the new policy and the new policy is interested in one number. The new policy is apparently based upon their quest to provide buyers with greater security. Reply
and lets hope these new policies don't reach the UK.. Reply
I never had one single bad feedback and have a feedback of 45. They just did this hold thing to me, Way I see it if i dont get paid then buyer gets nothing. So i prompty refunded them all of their payment, off to craigslist. Why would i ship something to someone when I didnt receive a payment. Only paypal got paid. Reply
The buyers scam the sellers on paypal all the time. They get items and do a buyer chargeback. Reply
I don't know if this is a good news or what. It has its pros and cons but the benefits are mostly on the buyer side. -- Pay Pal Policy Reply
Well if Paypal does this to me, I can guarantee that I won't be shipping ANYTHING till that 21 day hold has cleared. Reply
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