Interesting, I wasn't even aware that one could use a credit card to fund a Paypal gift payment.
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BEWARE paypal GIFT chargeback fraud that will defraud SELLERS
Many of you know that sending paypal GIFT payments offer little to no buyer protection.
HOWEVER, there is a loophole where paypal gift can be used to defraud THE SELLER.
I hesitate to share this info, but I think people should know and protect themselves.
Here's the scenario:
LESSON: DO NOT ACCEPT PAYPAL "GIFT" PAYMENTS IF YOU ARE A SELLER.
*NOTE: If the PayPal transaction occurred using the "item or service" option, then the seller can at least try to fight chargeback fraud by submitting proof of shipping and/or delivery.
HOWEVER, there is a loophole where paypal gift can be used to defraud THE SELLER.
I hesitate to share this info, but I think people should know and protect themselves.
Here's the scenario:
- The seller asks for the funds to be paid as GIFT, thinking this offers protection for the seller.
- The buyer sends a paypal gift using a credit card by clicking on the pay the associated paypal fees option. (I am paraphrasing the exact option here.)
- The recipient of the payment (seller) receives the GIFT payment and the full amount shows up in their account as a gift.
- Everything looks okay so the seller ships the watch.
- Days or weeks later, the fraudster buyer will issue a chargeback with their credit card company by claiming that their credit card was stolen, etc. The lies are easy.
- Credit card company will issue a chargeback, and in response, Paypal will hold the associated funds--which are now in the seller's account.
- Because this was a GIFT transaction, as far as Paypal is concerned, there was no sale or exchange of goods.
- Because there was no sale, the seller cannot use shipment confirmation to argue a legitimate transaction. Evidence of shipment means nothing when there was no official exchange of goods.*
- Seller's funds are held/retracted and buyer gets a free watch.
LESSON: DO NOT ACCEPT PAYPAL "GIFT" PAYMENTS IF YOU ARE A SELLER.
*NOTE: If the PayPal transaction occurred using the "item or service" option, then the seller can at least try to fight chargeback fraud by submitting proof of shipping and/or delivery.
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I did not know about the option until I ran across a seller who insisted that I had to pay using the GIFT option. I didn't have enough money in my checking account so I had to use my credit card for the GIFT payment and pay the fees myself.Interesting, I wasn't even aware that one could use a credit card to fund a Paypal gift payment.
Any seller who thinks that the gift option protects them from charge-back fraud is mistaken!
Thanks for the post and info halfapie. For all of us potential or practicing sellers it's important to know.
What may be even more important to know is that using the PayPal gift option for payment violates WUS rules and may result in suspension of one's account.Thanks for the post and info halfapie. For all of us potential or practicing sellers it's important to know.
Extract from Rule 4:
By describing a sales transaction as a "gift" to avoid legitimate fees (i.e. Paypal), violates WUS rules and is subject to thread deletion or account suspension.
HTH
Because of the lack of buyer protection, I would never use the gift option. I'd sooner pay the 3% on top of the sales price. A seller insisting on the gift option to avoid PayPal fees smacks of scam to me anyway. If you want to sell the watch, then price it 3% higher and give everyone a better feeling about the transaction.
Same thing happen to me I am as seller. The item was purchased through CC. I got scammed. Item shipped out and it was told CC is stolen. Paypal did NOT THING to recover my lost.
That was roughly over 5 years ago. You really don't have much protection if people purposely try to scam you. Not sure if Paypal today is better.
That was roughly over 5 years ago. You really don't have much protection if people purposely try to scam you. Not sure if Paypal today is better.
I was not aware of this and thanks to the OP for the info. I've been asked for Gift payments and complied thinking I was helping out the seller; no more. Just not good business.
Obviously, it was meant to send money to someone as a gift.
Nice that you brought this to our attention.
Obviously, it was meant to send money to someone as a gift.
Nice that you brought this to our attention.
I agree. If we all followed the rules here we would be better protected.What may be even more important to know is that using the PayPal gift option for payment violates WUS rules and may result in suspension of one's account.
Extract from Rule 4:
By describing a sales transaction as a "gift" to avoid legitimate fees (i.e. Paypal), violates WUS rules and is subject to thread deletion or account suspension.
HTH
Good advice. There is no reason to expect Paypal to assist you when you have intentionally subverted their policies in order to avoid paying their fees. I only use the gift option to send money to my kids. By the way, you can send a gift using a credit card as a funding source, but Paypal will charge fees for that. They will send money free from a linked bank account or from money in your Paypal account.
I have struggled with using the gift option to pay for goods, or receive payment. I have always been aware that the payer could fund a gift payment by a credit card, in which case the buyer would pay a fee, and could also later contest the deal through their credit card company.
Paypals own policy seems a bit unclear on the enforcement side. Apparently they seem to only take action if an account holder's use (abuse) of the gift option is excessive. In that case, Paypal's policy is simply that they may remove the gift option from the users account. So it seems that if it is not abused, once in a while use is tolerated. It also seems reasonable that a knowledgeable buyer and seller can agree to structure the transaction as they see fit. Now WUS rules prohibiting the gift option is another matter.
An interesting post on this: https://www.paypal-community.com/t5...eive-payment-or-pay-for-for-goods/td-p/327568
Paypals own policy seems a bit unclear on the enforcement side. Apparently they seem to only take action if an account holder's use (abuse) of the gift option is excessive. In that case, Paypal's policy is simply that they may remove the gift option from the users account. So it seems that if it is not abused, once in a while use is tolerated. It also seems reasonable that a knowledgeable buyer and seller can agree to structure the transaction as they see fit. Now WUS rules prohibiting the gift option is another matter.
An interesting post on this: https://www.paypal-community.com/t5...eive-payment-or-pay-for-for-goods/td-p/327568
Part of what you're paying for when you properly indicate a PP transaction as a "sale" rather than a "gift" is some (extremely modest) level of seller protection. You can't use "gift" transactions to avoid the 3% fee and then expect Paypal to protect you as though you had paid it. I would never buy or sell from a stranger who demanded that I use the gift option rather than the legitimate sale option.
As a seller or buyer gift payments exclude you from protection. So what happens if buyer/scammed gifts you and you transfer funds away from PayPal? They cannot pull funds from your bank without your approval.
Then you owe paypal money and they will sell the money you owe to collections agency and eventually it will be noted on your credit report as you owe money to Paypal (or more likely the collections agency to whom paypal sold the IOU to.). Also, you do not get to continue using paypal until you pay up and clear your name.As a seller or buyer gift payments exclude you from protection. So what happens if buyer/scammed gifts you and you transfer funds away from PayPal? They cannot pull funds from your bank without your approval.
It's good info regardless. Not all watches that are sold in our WIS world are started via WUS.What may be even more important to know is that using the PayPal gift option for payment violates WUS rules and may result in suspension of one's account.
Extract from Rule 4:
By describing a sales transaction as a "gift" to avoid legitimate fees (i.e. Paypal), violates WUS rules and is subject to thread deletion or account suspension.
HTH
Thanks OP.
This is not the case if you use Paypal Gift.Then you owe paypal money and they will sell the money you owe to collections agency and eventually it will be noted on your credit report as you owe money to Paypal (or more likely the collections agency to whom paypal sold the IOU to.). Also, you do not get to continue using paypal until you pay up and clear your name.
Paypal will do nothing.
If you use the normal channel and pay the fees then your statement is correct.
What is wrong with a wire transfer? I always read about paypal problems, gift or no gift I'm reluctant to use my paypal for anything but small stuff nowadays.
Wire Transfer is about the worst method unless you know the person very well.What is wrong with a wire transfer? I always read about paypal problems, gift or no gift I'm reluctant to use my paypal for anything but small stuff nowadays.
I believe the question is regarding as a seller.This is not the case if you use Paypal Gift.
Paypal will do nothing.
If you use the normal channel and pay the fees then your statement is correct.
So, buyer send you the "gift" money, then you pulled the money out of your account.
After couple of weeks, buyer does chargeback thus taking money from Paypal back into buyer's CC account.
At this point, only Paypal is out of money as the seller has the money in his account and buyer did chargeback through CC.
Really, Paypal is NOT going to stand idle and lose money, they will try to recover from someone, and in 99.99% of the case, it will be the seller using collections agency.
I don't think that Paypal's policy is unclear. "If you are selling goods or services, you may not ask the buyer to send you a Personal Payment for the purchase." I don't really agree with the poster that you linked who is trying to pick holes in the statement. (I do think though, that maybe it should be reworded to say that Personal Payment cannot be accepted, rather than requested. That would take care of the "loophole" regarding who is asking for Personal Payment to be used.)I have struggled with using the gift option to pay for goods, or receive payment. I have always been aware that the payer could fund a gift payment by a credit card, in which case the buyer would pay a fee, and could also later contest the deal through their credit card company.
Paypals own policy seems a bit unclear on the enforcement side. Apparently they seem to only take action if an account holder's use (abuse) of the gift option is excessive. In that case, Paypal's policy is simply that they may remove the gift option from the users account. So it seems that if it is not abused, once in a while use is tolerated. It also seems reasonable that a knowledgeable buyer and seller can agree to structure the transaction as they see fit. Now WUS rules prohibiting the gift option is another matter.
An interesting post on this: https://www.paypal-community.com/t5...eive-payment-or-pay-for-for-goods/td-p/327568
As far as enforcement, they're just being realistic. I don't take their qualified language as ambiguity. If they could enforce every instance of this, they would, but it's just not possible. (Or would take an insane amount of resources.) So they basically give a general warning about what could happen, to cover all the bases. I don't think it is tolerated, as you say. It's just a reality of running a business. Some of the inventory is going to "fall off the back of the truck," and you do what you can to prevent it, within reason.
Believe me, I'm no angel. I've used PP gift before. I've also bought goods from Amazon without reporting the taxes on April 15th. The morality of it is up to the individual, but I don't buy the argument that it is within Paypal's TOS.
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