Over the last couple of years, there have been several notable instances in the gaming industry where a publisher accepted a significant number of pre-orders via PayPal, only to see those funds frozen until after they delivered the games. That kind of suck!! We will be discussing how to avoid paypal freezing your accounts?
First, Important thing to know about paypal freezing your accounts
.The first thing you need to realize is that Paypal freezes funds on the same grounds as Visa and Mastercard, and they can hold your funds for 180 days from the date of the transaction (Paypal will hold for 180 days from the date of your account freeze)
Most notable involved Leder Games, publisher of the acclaimed Vast: The Crystal Caverns. In a detailed post on BoardGameGeek, Patrick Leder wrote the following about his experience accepting pre-orders for the second printing of Vast:
After Gencon I had some of the funds raised in my business checking as well as a Paypal account. I continued spending from my business account and honoring the few pre-Gencon agreements I had that I still had inventory. A fair amount of money piled up in my Paypal account and we started taking pre-orders for the second print run there.
On September 25th (A Sunday) with no preamble or warning Paypal said they were going to lock my account and ask me some questions about my business. I cooperated fully providing them with answers about how I ran my business, how pre-orders from the end of the KS to Gencon had or were being delivered and how I was satisfying my customers needs by providing a pre-order link for the second printing.
There was also a similar issue raised over at Thirtybees.com forum about this.
Because we started selling on Ebay then to our own website we have PayPal – and they are (were) our only payment processor.
They have switched us off!
No warning, no discussion, just an email this morning saying they did not want to work with us any more. Apparently we are too risky. Obviously we are not risky at all, we sell nuts and bolts. We have never had a claim against us and keep over £20000 in the account and a monthly turnover of around £30000
I am of course trying to appeal, but it is difficult to appeal when they have not told us why we are too risky and there is no real appeal process and we are not allowed to talk directly to the review team. Only standard support are allowed to send them a message and the review team “might” respond. But probably not
Is it just a simple glitch?
I actually think this is a PayPal website glitch. They asked us to apply for their new debit card which we did and they asked for some documents to upload which we can’t because every time we try their site crashes (multiple browsers, multiple computers)
So that is it. With no prior warning we are stuck with over £20000 in the account that is on hold for 180 days.
We have to effectively close our £5000 per month ebay account as you cannot sell on Ebay unless you offer PayPal
Our website also naturally takes a hit. Luckily a very quick review of thirtybees modules pointed me to Stripe and that is now installed and up and running. So we do have some consolation (actually liking the look of stripe anyway and will probably keep that even if payPal come back to us. And the Thirtybess module is great
Personally, I have had same experience with paypal freezing my account and asking for documentations and proof on their website that crashes every time i do it.. anyway, i have heard sometime ago that it usually freezes an account whenever your PayPal balance reaches certain thresholds, perhaps that is one of the reason mine and your account was frozen, $10k i think was it. Mine was a little lower than that.
I’m really pissed off and sorry to hear this happened to meaningful people who wants to earn some hard-earned cash. PayPal can be very arbitrary sometimes and it’s really hard to see how they come to some conclusions. I tried reaching out to them on social media (Twitter in particular), with no positive results until i gave up on it. I didn’t get my money back. Easy money for paypal.
Complaints that never been heard for years
PayPal customers have complained for years about the nightmare of trying to pry frozen funds loose. Here is an article from money.CNN about paypal’s overzealous fraud filters.
Paypal says this on their policy, “We use reserves to help minimize losses and create a safer shopping experience for your customers.” To me, this is such a vague statement that leaves PayPal a lot of wiggle room in terms of how much of your money they choose to freeze.
So really just wanted to say a couple of things here: Paypal’s arbitrary freezing rule is a pain in the ***, could be a really trying day if you and when you are hit with one.
Here is what you can do to avoid paypal’s pitfall and arbitrary freezing:
- Follow PayPal’s policy precisely as stated. Just calling this out. Even following their policies to the letter they can arbitrarily choose to freeze your account and you have no recourse. Having lived through this myself and having customers have this issue, there seems to be little you can do. We even talked to paypal directly before these situations and STILL had it happen.
- Use PayPal sparingly for pre-orders, and whenever your PayPal balance reaches certain thresholds (say, $10k), immediately transfer half of the funds to your bank account so you don’t build up a huge balance that PayPal could potentially freeze. (Update: PayPal can withdraw funds from any linked accounts as they wish [presumably to cover reserve amounts], so be wary about this option.)
- Use separate PayPal accounts for pre-orders versus selling in-stock inventory to mitigate some of the risk.
- Make sure you all have a fall back plan should your payment processor decide to put you under suspension for no reason.
- Summary: turn off the PayPal option on your e-commerce platform(s).
It is unfortunate because paypal is such a well-known and convenient payment option, but the pitfall out weights the benefits really.
So, moving on. There are better options
When you experience paypal freezing your accounts, it is time to look for a better option. Stripe for example, is a rapidly build production-ready integrations with modern tools, from React components to real-time webhooks. Using Stripe’s developer platform means less maintenance for legacy systems and more focus on core customer and product experiences. Thirtybees and Prestahop has a ready Stripe module allows your webshop site to accept payments from the Stripe payment processing platform. This module also supports the latest Stripe API and also ApplePay as well.
You might want to proactively reach out to Stripe and let them know your expected sales volumes and talk to them about your business.
Here is a screenshot of Stripe Features:
What can we glean from all of this?
Firstly, you need to stay away from paypal when you run pre-orders in your prestashop development or thirtybees website development, or if your sales reaches up to 4 digits?
And secondly, use stripe instead. We are not affiliate or connected with Stripe. We recommend this base on ours and others experience having dealt with paypal freezing your accounts. And, who needs paypal outrageous rates, anyway?
Tell us about what you think about this article in the comment section. We’d love to hear from you about your experience with paypal positive or otherwise!