A customer recently lodged a PayPal dispute wanting a refund. The funds associated with the transaction were locked and my paypal balance turned negative as a result. I topped up my balance to slightly above zero in order to avoid any problems. Then it was the matter of resolving the dispute.

This should have been straight forward but when I tried to refund the transaction via the disputes screen, PayPal stated that it could not be refunded because I did not have enough funds on my PayPal account. So here is how it works: PayPal locks all funds associated with a disputed transaction and unless you have additional funds on your paypal account, you can’t refund the disputed transaction. A totally ludicrous system.

What I had to do was ask the customer to cancel the dispute so that I, in turn, could refund the transaction. The customer would have been better off not starting the dispute in the first place for it certainly did not help him get his money back. PayPal’s dispute system clearly has the principal purpose of endowing PayPal themselves with more liquidity for the time being. The idea is not to help buyers and sellers resolve anything.

I have a swedish paypal account but I receive all payment to my USD balance. When I withdraw money to my swedish bank account, paypal converts from USD to SEK. PayPals currency conversion rate is around 4% below market value meaning that they steal 4% of the money being converted just like that. This is only the beginning though.

It just so happened that I initated a withdrawal of 252 USD exactly 24 hours ago. This was converted to 1,617.02 SEK at an exchange rate of 1 U.S. Dollar = 6.41677 Swedish Kronor. At this stage my USD balance was zero. Unfortunately a customer filed a complaint about an order on the magnitude of -33.27 USD today, just 1 day after the withdrawal was initated. This turned my PayPal balance negative and as a consequence the withdrawal was reversed. However, the reversed withdrawal was credited to my SEK balance, not my USD balance. To get the money over into my USD balance, from which it originally came, I would have to use PayPal’s currency conversion once more and lose another 4% in currency conversion.

This is still not the end though. PayPal happens to have the kindness to display the value of all balances combined in the currency chosen as main currency which is USD in my case. After the withdrawal had been reversed it displayed 224 USD which is a far cry from the 252 I originally had. In fact, it is is only 88% of what I had which means that 12% has been lost over the course of 2 conversions. Part of the explanation might be a change in exchange rate between the two days but it is still ridiculous. There is no valid reason why my withdrawal should not be returned to me in the currency it was converted from in the first place.

This how PayPal cuts the corners and scims extra money off of its users. It is not enough with the transaction fees which normally vary between 3% and 15% depending on transaction size. They can take up to 12% more if you don’t have a bank account denominated in the currency you receive payments in, leaving PayPal with up to 27% of your money in their pocket just like that. They are criminals.