One more reason not to keep money in your Paypal account - "Rolling Reserve".

[shrike4242]

Found this on the Consumerist, and thought I'd share:

http://consumerist.com/5334528/paypal-takes-bite-out-of-users-funds-calls-it-rolling-reserve

In addition to tacking on some sneaky new fees (http://consumerist.com/5334161/nobody-look-at-the-paypal-secretly-adding-new-fees), PayPal (http://consumerist.com/tag/paypal/) apparently has instituted another off-putting practice on some accounts. According to reader Melissa, the online money changer was taking 20 percent off of her monthly sales and keeping it in reserve in case a customer initiated a chargeback. Melissa explains: My company has had a Paypal account for 7 years now. We do most of our sales (tickets for tours) online and have good credit, etc.
Recently, on July 1, without any notification or explanation whatsoever, Paypal has (daily) deducted 20% of our money from sales and put it into a "Rolling Reserve" account, each transaction of which they are holding for *2 months*. Our bank account is linked to our Paypal account so any chargeback (we've had 2 in 7 years) comes directly out of our bank account if we have no money in our Paypal account. We are a small business and we have employees to pay. I think that a 20% hold for 2 months on money paid to us is excessive. We weren't notified either — is that legal?
This is just a bad business practice on the part of Paypal, and I want others to be aware of it. I talked to a Paypal representative and they could not give me an answer as to why this fee was instituted, other than to say that they were filing a complaint from me to have it removed.
After some more haggling, Melissa got the reserve albatross removed from her account. PayPal sellers, be on the lookout for a similar battle.

[donkeydrop]

It only applies to businesses that do a large volume of sales, and it's really no different than if you were to do your sales through a credit card company. Let's say I want to take Visa cards as payment for selling widgets; then I have to provide some financial guarantee to Visa. For small businesses that don't have a lot physical assets (buildings, equipment, etc.) that guarantee is often in the form of a reserve or a lien on a personal bank account.

Think about it this way; if a business is not keeping one month's cash flow in reserve then they are already in financial trouble. This is often a sign that:

(a) the company is about to go bust, or
(b) the owner pays themselves too much and relies on spending personal cash when trouble occurs, or
(c) the business is a scam and money is being filtered off so that the company can do a hit and run

Paypal is just insisting that the reserve that should be there anyway is acessible to them in case the business goes bad.

[xycury]

The problem is they are the only ones out there.

if Ebay wasn't such a tight ass with paypal....

Other banking systems should be setup where we can easily wire money to each bank account if needed. The rest of the systems just have to catch up.

There is Revolution Money from another bank. Google checkout is sketchy at best.

We need a proper E-check that doesn't take 10 steps back like they are doing it now.

[eastshore4]

Rolllllling reserrrrrrrrrrve!!!

[donut]

uhh, Ebay bought Paypal some time ago....:roll:

The problem is they are the only ones out there.

if Ebay wasn't such a tight ass with paypal....

Other banking systems should be setup where we can easily wire money to each bank account if needed. The rest of the systems just have to catch up.

There is Revolution Money from another bank. Google checkout is sketchy at best.

We need a proper E-check that doesn't take 10 steps back like they are doing it now.

[xycury]

uhh, Ebay bought Paypal some time ago....:roll:


And you're remarking on what? huh? :roll:

Because they bought it, they locked all other companies AND forms of payment out. Just recently it's no more Money orders, no COD, no checks.

It's a closed system.

Still completely unfair.