Oct 152008

Today I paid for an item online using PayPal, which would not usually be a blog worthy activity. But this time it was a frustrating experience, due to a recent (apparently) change PayPal has made in the process.

In the past I’ve enjoyed using PayPal, and always chose to use a credit card. This way any issues with online retailers would be easier to deal with, rather than taking the money directly out of my checking account. Plus, like all Americans I’m protected against any credit card loss over $50 by federal law. The law pertaining to direct payments and debit cards is much less clear.

I made a payment through PayPal with my credit card less than three weeks ago. As it turned out, the retailer didn’t have the item, and reversed the charge on my card. Had they already received the money from me, the rebate process would have been more complicated.

But today when I went to make another purchase, the ability to make my credit card, as opposed to my checking account, the source of PayPal payments was gone. I was forced to make a payment directly out of my checking account, with no option to make my card the funding source. It’s not under My Account, Profile, or anywhere else I can find. To top it off, trying to use the help function gave me inaccurate information.

I’m not happy about this at all, for the reasons above but also for the sheer coercion. I understand the economics — it’s more economical for PayPal to have customers use the direct payment option, since they don’t have to pay a percentage to the big card networks like Visa and Mastercard. But if that’s the case, PayPal should incentivize users to do so, not force them. If this change is permanent, I won’t be using PayPal unless I have to.

With the economic downturn, I’d predict we’ll see more of these types of decisions being imposed on online customers. The struggles of online networks like MySpace, Facebook and YouTube to monetize their traffic have been well documented. Last year saw the fiasco of Facebook’s Beacon advertising plan, where users’ activities were tracked without their consent, even on sites outside of Facebook. In the face of widespread protests the company allowed user to opt out, and CEO Mark Zuckerberg eventually had to apologize. Jacqui Cheng of Ars Technica from last December: http://tinyurl.com/2at552

And this year they have a large scale protest on their hands over the mandatory redesign of the site design. Over 2.5 million users may boycott the network next week — story by Juan Carlos Perez of IDG News: http://tinyurl.com/4l2vq5

In the immortal words of Larry the Cable Guy, “What the hell is this, Russia?” Social networking and the Internet in general are supposed to be about personal empowerment and a redistribution of choice and freedom to the individual. Surely the sharp minds that created these exciting services can think of a better way to make a profit than engaging in online authoritarianism.

  One Response to “Giving PayPal Some Pushback”

  1. Thanks for bringing this issue into the light.

    When a credit appeared within my PayPal, PayPal then forced me to do the same thing. I spoke to a friend, who then advised me to use the credit amount within my PayPal account and pay the money back to my credit card online. I did so and the PayPal account then held a zero balance and from there I was able to work with my credit cards again.

    Good writing, please keep it up.

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