Is PayPal Safe?

Tips for Buyers and Online Sellers

PayPal
Sean Gallup / Getty Images News / Getty Images

PayPal is a popular tool for sending and receiving money online. Whenever you link your financial accounts to an online service, security should be at the top of your mind. So how safe is PayPal?

For the most part, it’s perfectly safe to use the service, but it really depends on your concerns.

  • Buyers will find that PayPal is an easy and secure way to make purchases
  • Sellers can also benefit from using PayPal, but there are risks to be aware of. Those risks aren’t unique to PayPal, but some sellers are unaware of potential problems.

    Is PayPal Safe for Buyers?

    For the most part, PayPal is safe when you use it to send money. Nothing is completely risk-free – glitches and data breaches are possible anywhere – but PayPal is a reputable company with enough security (and consumer protection) built-in to keep you relatively safe online.

    Data security: PayPal’s website is secure and encrypted. As long as you have a secure connection to the legitimate PayPal site, any information you exchange is hidden from prying eyes. PayPal uses all of the same security features that you’d expect from any large financial institution, and the company even offers financial rewards to “white hat” hackers who let them know about vulnerabilities. It could get hacked, but it’d be tough.

    A layer of protection: If you’ve ever used your credit card online or handed a check to a merchant (thieves can find your bank account and routing numbers on any personal check), you’ve taken just as much risk as you take when you provide that information to PayPal.

    In fact, using PayPal might even be safer than giving your credit card number (or bank account information) directly to the website you’re buying from; you can keep that information in one place – at PayPal – instead of spreading it around everywhere you shop. If something happens, you won’t need to cancel your cards and update all of your automatic billers – you can just secure your PayPal account.

    Tips for Safe Buying

    Take precautions to ensure that your personal and financial information stays safe

    • Keep software up-to-date on your computer or mobile device – especially security software
    • Avoid public Wi-Fi for financial transactions, including managing or even accessing your PayPal account
    • Use a credit card as your funding method instead of a debit card or direct bank transfer (see below for details)
    • Use a dedicated computer for financial transactions if you want to be especially safe. Use a different device for surfing and social media
    • Be wary of links in emails.  Phishing scams may feature messages that appear to come from PayPal but really link to impostor sites that steal your account information.

    Disputes and Fraud

    What happens if somebody spends money from your PayPal account without your permission, or if you pay for an item that never arrives?

    Buyer Protection: PayPal’s Buyer Protection and Account Protection programs might reimburse you; you need to report the transaction quickly, and certain types of transactions are not covered by Buyer Protection. Buyer Protection is similar to the benefits you get with a credit card: you can reverse the charges if the seller fails to deliver what was promised.

    Read PayPal's policies to ensure that Buyer Protection is available for any transaction you're concerned about.

    Funding method: for extra protection, it’s a good idea to complete PayPal purchases with a credit card (use your card as the funding mechanism – not an "instant transfer" from your bank account, debit card, or PayPal balance). Why? If PayPal decides not to refund your money, you can try again with your credit card issuer. What’s more, a credit card is not linked directly to your bank account like a debit card, so you won’t have an empty account while you clean up the mess.

    All that said, paying for purchases with PayPal is likely much safer than paying with Western Union or wiring money – those payments cannot be reversed.

    Is PayPal Safe for Sellers?

    You naturally want every transaction to result in mutual gain, but what’s good for buyers isn’t always good for sellers.

    If you run a business, it’s important to get paid for the products and services you provide. So is it safe to rely on PayPal for processing customer payments?

    Most businesses that use PayPal for payments find it to be perfectly safe; they get paid more or less as they expect, and fraud is little more than a rare annoyance. However, there are plenty of horror stories from sellers who feel that PayPal hung them out to dry. There are two sides to every story, but there are enough stories out there that businesses should take notice before assuming that PayPal is safe.

    Disputed charges: the main risk to sellers is the ease with which customers can dispute charges. Customers can claim that goods never arrived or that you did not deliver what you promised, and PayPal seems to assume that the customer is (almost) always right. You can plead your case, but you’ll need solid proof to get PayPal to decide in your favor.

    This risk is not unique to PayPal. Credit card charges can also be reversed fairly easily. However, for whatever reason, PayPal seems to have a reputation for being especially difficult to work with (perhaps it is well-deserved, or perhaps there is just a vocal minority).

    Payments might be disputed for several reasons:

    • The payment was truly fraudulent (the customer’s account was hacked, for example)
    • A shipment never arrived safely
    • A customer was dissatisfied with your product

    So, what can you do to protect yourself? Be careful about how you sell and who you sell to. Expensive items are (not surprisingly) the most appealing targets for thieves. To reduce the odds of a problem, try the following:

    • Ship only to verified addresses
    • Avoid delivering goods in-person (you’ll need proof of delivery from UPS or a similar shipper for PayPal to side with you)
    • Require a signature for expensive items
    • Clearly explain what you’re selling, including any confusing features or limitations that make customers unhappy (include photos of any defects or damage)
    • Communicate with unhappy customers promptly and politely

    In the past, businesses selling intangibles or getting paid for a service were immune to Buyer Protection problems. That's no longer true, so be sure to document your communications so that you can provide proof to PayPal if there's a dispute.