Would it be a serious problem if you lost your PayPal balance? What if it lost value as a result of the current financial climate?
(This information applies primarily to U.S. users. If you are outside the U.S., double-check to see if your funds are at risk.)
Since PayPal is not a bank, funds are not directly covered by FDIC (Federal Deposit Insurance Corporation). They are covered by what's called FDIC Pass-Through Insurance. But pay attention, if your funds are in PayPal's money market fund, they are not covered at all by FDIC and may lose value.
First, here's what's covered by FDIC Pass-Through Insurance, from the PayPal site:
You do not need to keep funds with PayPal in order to use our service. If you do hold a balance, you can do so in two ways: (1) PayPal, as your agent, will place your funds in a pooled account at an unaffiliated FDIC-insured bank or savings institution, which is eligible for pass-through FDIC insurance coverage; or (2) you can elect to earn a return on your funds by enrolling to invest all funds that you receive into the PayPal Money Market Fund. The PayPal Money Market Fund is not FDIC insured, not guaranteed by any bank and may lose value. PayPal keeps a record of the amount of your balances, which you can check by logging in to your account through the PayPal Web site at any time.
So the money market funds can lose value. If your funds are not in the money market, PayPal keeps your money in one of three banks. (Wells Fargo, Bank of America, or Comerica - California, U.S.A.). If one of those banks fail,
your balance placed at the bank would be subject to FDIC pass-through deposit insurance coverage, along with any other deposits you hold at that bank, up to a total of $100,000.00 USD. Pass-through deposit coverage is contingent upon PayPal maintaining accurate records and on determinations of the FDIC as receiver at the time of a future receivership of any bank at which we place your funds.
The only way your funds are protected by FDIC is if they are not in the PayPal Money Market Fund. If that makes you nervous, you can close your PayPal Money Market Fund, and have PayPal keep your funds in an FDIC insured bank by-
- logging into your PayPal account
- click "Profile"
- click "Money Market Fund"
- click "Close Money Market Fund"
It will take a little while to get this done, so plan ahead. The bottom line is your funds are covered by FDIC if they're not in the money market fund.
There is one other thing PayPal says:
FDIC pass-through deposit insurance protects you only against the failure of the bank at which PayPal places your funds, and does NOT protect you against PayPal's insolvency. Through the terms of our User Agreement, we believe that your funds will also be protected from any claims of PayPal's creditors and will be returned to you even in the unlikely event of a PayPal insolvency.
It seems like the most reasonable thing to do is scrape your PayPal account regularly, into your bank. At least there is one less layer between you and your money. Keep it simple.
Here is the direct link to the PayPal-FDIC page: http://www.paypal.com/cgi-bin/webscr?cmd=p/gen/travelers-outside
Popularity: 18% [?]
{ 8 comments… read them below or add one }
Anyone who leaves money in their paypal balance is dumb anyway honestly.
Do a nightly sweep!
Time was I maintained funds in a PayPal MM account, that was when the rates were good. As the rates quietly dropped I removed my funds. If I have to accept PayPal I sweep the same day. This is common sense as BMX said.
WHat about using the funds towards my Paypal credit card? I get a nice rebate when I use my card. I guess it’s a tradeoff…rebate for fear. I usually keep 1-2 grand in the account for Xmas ebay shopping. Works well.
@Muk
I personally don’t think PayPal funds are at risk. But I like to scrape my account into my local bank regularly.
I’ve grown a bit cynical with most things eBay touches, so I like to keep my money away from them when possible.
The amended Paypal User Agreement, which allows Paypal, at it’s “sole discretion,” to withhold seller funds for 21-180 days without arbitration is enough to make any wise person to close their Paypal account!!!
By the way, Paypal (owned by ebay) also keeps ALL of the interest the money accrues, while they are denying you access to your funds (unless you sign up and pay for another Paypal money-maker scheme, which allows you to regain those fees, but not without a battle).
We can thank ex-CEO, Whitman and current ebay CEO, Donahoe for their “Disruptive Innovation” SCHEME for other such detrimental policies, which are killing sellers’ businesses, reputation, finances and morales.
Search the internet for “Ebay Stockholders
and Sellers Calling For Immediate Termination of John
Donohoe CEO Petition”.
To learn more from ebay employees about the EXTREMELY POOR upper management of ebay, go to glassdoordotcom.
FIRE DONAHOE!!!
Don’t trust ebay and paypal. They locked my account for no reason holding over 5k for several weeks. I have 100% feedback with over 7 year history with ebay. You cannot withdraw much money from paypal at once without the chance of getting your money held for a long time.
I fully echo the sentiments above. Until recently, I had 100% feedback….and no issues with my buyers, at all. Recently, I received a negative feedback from a buyer that failed to send me size details for an item, depsite ailng her several times! A second buyer claimed that she had not received an item that I had Airmailed to Gibralter, despite having proof of postage.
As a result, the Ebay/Paypal partnership are now holding every payment that have recently received, making up over 90% of my account!! I cannot operate my account any more, nor am I able to pay my monthly fees!!! They claim that funds will be released when the buyer leaves feedback but, even when I have proof of delivery, and I have messaged the buyer to prompt feedback, the feedback is still not forthcoming!! Hence, no usable funds!!! This situation is preposterous and I will be shortly moving over to alternative markets.
Thanks for your time…..
As an addendum, I have had several phone call conversations with both Ebay and Paypal today. Ebay claim that, once an item has been signed for, the funds are automatically released…..NOT TRUE!!!! I have funds pertaining to an item that was received 2 days ago (I have the time and signature on Royal Mail tracking) that still had not been released. It was only when I rang Paypal to question them that they manually released it for me! Further “conversations” with Paypal also report a fault on their system that prevents payments being automatically released, and that all “releases” are done MANUALLY!!! WHAT THE F**K!!!!!
Ebay are definitiely killing this golden goose!!!!
I’m tired of this and will be going to “The River”…..if only to drown myself!!! LOL