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Putting The PayPal 21 day Hold Into Perspective

February 9th, 2008 by Skip McGrath

PayPal announcement that they will place a 21 day payment hold on certain high risk transactions has angered sellers.

I have received several emails from sellers wondering what is behind this policy.  Most of them are suspicious of eBay/PayPal’s motives, but upon investigation, I think this policy makes some sense.

It is important to remember two things:  1) PayPal recently extended seller protection to unconfirmed addresses which is a real plus for sellers.  We had three payments to bad last year and on all three the seller had told us the item was a gift and asked us to ship it to an unconfirmed address which we did.  We got burned on all three transactions.  And, 2) The 21 day hold will only affect a small percentage of transactions that have a high risk of fraud.

I spoke to my contacts at PayPal and they said the purpose of the hold is to target transactions that have the highest rates of either fraud or unsatisfactory transactions.  They would not identify them specifically but I can tell you they usually include very hot selling products such as Wii game controllers or famous name merchandise that could be subject to a vERO complaint or transactions for expensive products by new sellers with low feedback and anyone with very low DSR ratings including those who are dinged for charging too much for shipping.

So if you are selling iPhones, Gucci handbags, Plasma TVs or expensive rare coins and you are new to eBay and/or have a low feedback score, they you might end up on PayPal’s Radar.  If I could use a military metaphor, once you are identified at a potential hostile target, you have a higher chance that one or more of your successful listings could have a hold placed on it until PayPal determines that you are a “friendly.”

If you do get a hold on a payment release, that doesn’t mean you necessarily have to wait the full 21 days to get paid. There are two ways to get the payment released sooner.

  1. If the buyer receives the item and leaves you feedback, PayPal will release the payment.
  2. If you shipped the item with delivery confirmation and the shipper shows the item as delivered, send the tracking info to PayPal and they will release the item.

Although the policy will only affect a tiny percentage of sellers and transactions, it is inevitable that a few honest and innocent sellers will occasionally get caught up in the anti-aircraft fire (back to the military metaphors) but there are ways to protect yourself.

  1. Don’t fly near the enemy formations: If you are a new seller with low feedback and trying to sell hot or very expensive consumer products and products with a high rate of fraud (jewelry, famous designer items, rare coins, etc.) then you are going to show up on the radar.
  2. Wear your armor: If you are selling an expensive item, always ship with some type of positive delivery confirmation and get the tracking numbers.  Tell the buyer that you are shipping this way so they know they will have to have someone sign for an item.  Communicate openly, often and completely with the buyer.  After you ship an item, email the buyer a few days later and ask if they received it, was everything OK, tell them you are going to post feedback for them and ask them to post feedback for you. Also watch your shipping costs.  If you have high packaging or handling costs, explain that to the buyer. Buyers hate high shipping costs but they hate surprises more.  If you are up front with people, they will usually understand.

If you are a small or new seller, you should be giving a high level of customer service anyway to help you both build your Feedback and DSR score quickly and to help you stand out from the competition.

Oh, one last thing.  If you are signed up for the PayPal Money Market fund, PayPal will pay you interest on the funds during the 21 days hold as long as the money is realease to you in the end.

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