PayPal is a popular tool for sending and receiving money online. Though it's been in business since 2002, the most important concern is security. How safe is PayPal?
For the most part, it’s safe to use the service and link your accounts to PayPal. The level of risk depends on what you use the service for.
- 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. No system is completely risk-free—glitches and data breaches are likely to happen to any company in the internet age, even the best ones. But PayPal is a reputable company with the highest safety and consumer protection standards in place to keep its users relatively safe online.
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 industry-standard security features that you’d expect from any large financial institution, and the company even offers financial rewards to “white hat” hackers who discover vulnerabilities.
Using PayPal may be even safer than giving your credit card number or bank account information directly to the website you’re buying from. That's because your information is being kept in one place—at PayPal—instead of being shared 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 by changing your password or card number.
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 viewing your PayPal account. Use mobile data instead if you’re out and about.
- Use a credit card as your funding method instead of a debit card or direct bank transfer, since, unlike a debit card, a credit card does not have an available cash balance that you can access.
- Use a dedicated computer for financial transactions if you want to be especially safe. Don’t use that 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.
Handling 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?
PayPal’s Purchase Protection program might reimburse you. To take advantage, you need to report the transaction quickly, but know that Purchase Protection may not cover all transactions. Purchase 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.
Before you rely on Purchase Protection, read PayPal's policies to ensure that the service is available for any payment that you're concerned about. Some transactions are not eligible.
For extra protection, it’s a good idea to complete PayPal purchases with a credit card. That means using your card as the funding mechanism—not an "instant transfer" from your bank account, debit card, or PayPal balance. If PayPal decides not to refund your money, you can try disputing the transaction again with your credit card issuer. And a credit card is not linked directly to your bank account like a debit card is, so you won’t have an empty account while you clean up the mess.
Is PayPal Safe for Sellers?
If you run a business, it’s important to get paid for the products and services you provide. Is it safe to rely on PayPal for processing customer payments?
Most businesses that accept payments with PayPal find it to be perfectly safe. They get paid more or less as they expect, and fraud is little more than a rare annoyance. Plus, PayPal does have a Seller Protection policy, although you must meet eligibility requirements for this feature.
Facing 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 then dispute or attempt to reverse the transaction. 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. Customers can also reverse credit card charges easily.
Customers might dispute payments for several reasons:
- The payment was genuinely fraudulent (the customer’s account was hacked, for example).
- A shipment never arrived safely.
- A customer was dissatisfied with your product.
Tips for Safe Selling
The best way to protect yourself is to be careful about how you sell and whom you sell to. Expensive items are—unsurprisingly—the most appealing targets for thieves. To reduce the odds of a problem, try the following tips:
- Ship only to verified addresses. You can cut down on delivery scams this way.
- Avoid delivering goods in person. It’s better to have proof of delivery from UPS or a similar shipper if you want PayPal to side with you.
- Require a signature for expensive items.
- Clearly explain what you’re selling, including any confusing features or limitations that could make customers unhappy. Include photos of any defects or damage in order to avoid surprising your buyer.
- Communicate with unhappy customers promptly and politely.
Be sure to document your communication with the customer so that you can provide proof to PayPal if there's a dispute.
Is PayPal a Replacement for Your Bank Account?
PayPal is not a replacement for a fully functioning bank account. If you can’t qualify for a bank account, other financial products—including some prepaid debit cards—may offer similar features along with FDIC insurance on your savings.
When your account is FDIC insured, you are generally protected from any losses up to $250,000.
However, your PayPal balance is typically not FDIC-insured, which is one of the drawbacks of using PayPal as a replacement for a bank account. While PayPal has explored ways to offer protection to customers on certain accounts, the coverage is not broadly available.