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PayPal's Reserve Policy Can Disrupt Cash-Flow

Posted by: John Tozzi on August 11, 2009

Consumerist reports that PayPal has started holding back portions of some merchants’ receipts as large as 20% in a rolling reserve to cover charge backs or refunds.

It’s not just PayPal. Credit card processors of all types are increasingly holding merchants’ money in reserves, as BW’s Amy Barrett and Jeremy Quittner reported in April. Here’s why:

When a processor agrees to clear a company’s credit-card transactions, the processor then becomes responsible for providing customer refunds. When an unhappy consumer asks their credit-card company for a refund, the credit-card issuer gets that money from the processor. The processor, in turn, pulls the money from the merchant’s account. If the merchant has gone under, the processor has to eat the loss. With business bankruptcies on the rise, processors fear dishonest merchants might close up shop and skip town, leaving the processor on the hook for any refunds.

PayPal will start processing transactions for pretty much anyone instantly, so they have a legitimate interest in managing their risk and not taking a hit on charge backs. PayPal spokesperson Amanda Pires told me that the reserve requirements are a new policy instituted earlier this year for less than 1% of PayPal sellers, and that they’re the most visible piece of a larger risk management strategy. PayPal addressed some of this in a blog post in June.

The biggest risk to small businesses here is that the reserve requirements can disrupt their cash flow, especially if the processor doesn’t adequately notify them. Some merchants in the story above (not PayPal customers) reported that they didn’t find out until the reserve withholding had already begun. The reader in the Consumerist post says PayPal did the same thing.

PayPal’s Pires says sellers get a clear email notice explaining the reserve requirement 30 to 60 days before withholdings begin. For high volume accounts, customers get a phone call. She says reserves are typically 1% to 5% of PayPal sales, but can go as high as 20%. PayPal determines whether to require reserves based on risk associated with the type of product or service being sold, the merchant’s history of charge backs, and the length of time they’ve been PayPal sellers.

Some online businesses may have all or most of their revenue flowing through PayPal, and 20% is a big chunk to have held for two months — enough to put plenty of companies out of business. Holding reserves may not be an unreasonable policy, but sellers need proper notice and the chance to change processors if it looks like the reserves PayPal wants to hold are more than the merchant can bear. Pires says customers are encouraged to call PayPal if they think the reserve is too onerous and that the processor will try to work with them. Pires says customers with questions can call PayPal at 877-729-7252.

If you’ve run up against reserve requirements, from PayPal or other processors, let us know in comments below or on Twitter.

Reader Comments


August 12, 2009 12:55 AM

John can you contact me. I have some info for you


August 12, 2009 01:47 AM

Disrupt cash flow!!

If your margins from selling on eBay are the usualy single digit rubbish after eBay and Paypal fees, you'll have to sustain running at a loss until Paypal feel inclinded to pay or simply close up shop!

It's easily fixed, don't use either of them! And eBay is at a loss to figure out why sellers are leaving in droves?


August 12, 2009 03:12 AM

Why should I leave a comment on Twitter if there is a comment box right here!

Pacific Coast Outlet

August 12, 2009 08:42 AM

For all ebay users: Copy and past the link below to view the discussion further and in honest detail of paypal rolling reserves.

You can find us through the discussion boards on ebay.


August 12, 2009 11:26 AM

Mr. come you don't know Paypal users are not merchants ? Also Paypal is not a Provider ? They use a Provider and are a Middleman. Would your story change, if you confirmed this ?

Did you just let Paypal define the relationship, for you ?

Just curious, as it makes the article quite erroneous, based on the stated relationship.

If you wish to know more you can go to the link above and read post 305/306. I would be most interested on your take, after a little investigation.


August 21, 2009 03:12 AM

Screw Paypal and their rolling reserves. They just started holding 20% for 60 days on us. Only one chargeback in nearly 2 1/2 years doing business with them. That chargeback was due to a communication error between us and the customer. Resolved quickly and the customer even came back and made another purchase from us in July. Paypal couldn't come up with a legitimate reason for holding on us. We asked for a review and after just two days they said that their decision was final. Our profit margins are less than 20%. We cannot sustain this over the long haul and have opened an account with the same processor that handles the retail transactions at our other business. We were perfectly happy with them but I will avoid them at all costs now. I hope they screw enough people, lose their best customers and go out of business.


August 21, 2009 05:15 PM

I am not in favor of the new rolling reserve. I could understand withholding some of my funds as insurance if I had a history of reversed payments/charge backs, but I have never had one! I accept payments for my web design services via pay pal. I have never sold anything on Ebay. Seeing what others got hit with though, I am now happy that I only got hit with a 10%, 30 day rolling reserve.

What if I want to close my account and withdraw all of my funds? I can't withdraw all of MY money. I could understand a 5 day hold or even a 10 day hold. But 30 days is ridiculous. I am considering no longer using pay pal because of the rolling reserve. Paypal already deducts about 3% of my money for using their service, now I feel that they are holding my money hostage so that they can collect interest off of a fat rolling reserve account. Not happy.


August 21, 2009 05:26 PM

I just did a google search for "paypal alternatives" and came up a few links. The first one is hilarious, the second seems like it would work for someone like me who does a few large transactions rather than a lot of small ones on ebay.


August 26, 2009 12:36 AM

I have never had a chargeback, ever. I don't sell on Ebay. I use Paypal--and pay a big fee--to give our customers a credit card option. I typically leave only $10 or $12 in the Paypal account after someone transfers money into my Paypal account. Apparently, Paypal isn't making enough money on me! Paypal just put a 20 percent reserve over 90 days on my account--on money that is not in there. So now I have a -$527 negative balance. No way am I having another customer transer via Paypal unless they reverse this!


August 28, 2009 04:45 AM

Paypal has had my reserve of 6400 on hold now for over 7 months. They will not release it. They keep giving me some unknown bs on why they are holding it. I am going to call tomorrow and yell and scream at them. this is rediculous


August 31, 2009 03:07 PM

I'm a consultant, currently using + a merchant services company. I was considering PayPal so I could accept payments on multiple niche sites, until they told me they wanted a 20%, 90-day rolling reserve! Outrageous! Business is tight in this economy and there's no way we can afford to defer 20% of our revenue for 3-months. PayPal can take a hike! I'm staying with my current set up.


September 1, 2009 05:14 PM

Well, I just got my letter.
2 years, 1 chargeback, and I even prooved the buyer received what he ordered a signed for ups package.

they are wanting to rip 30%, yes i said 30 percent of my incoming funds for 90 days. Im not even in a high risk industry. still 30 percent, higher than my markup on most things. so I have to go into the hole for 3 months. Meanhile, this bank wont give me a loan.. I might as well just sell the company.

How can they expect anyone to give up 10 percent for 3 months, much less 30%

One thing is for sure, I am moving on to another processor. This is totally unfair, and it is this kind of junk that makes me just want to close up shop and start drawing like the rest of the lazy idiots who set on their but while my tax dollars pay them. Some of them live pretty good lives!!

John Mohan

September 2, 2009 04:13 PM

I successfully have had a paypal account for nine years and use their Website Payments Pro for my 3 websites' shopping carts. I run more than $200,000 per year in sales through the account.

I received a phone call today from a paypal rep telling me they are going to take 15% of every sale I make from now on until a reserve of $30,000 is built up, which they will keep as long as I have my account!

The thing is, 15% represents more than my net profit (actually, that's about twice my net profit).

In comparison, the mafia is a nice organization.


John Mohan


September 2, 2009 09:00 PM

I got a good one for you guys. I have never had a chargeback, never had a complaint or a case opened up against me....... I got a call the other day telling me that my refunds were high. I told the lady thats impossible and then she realized she made a mistake. But told me anyway that she was holding 25% of all my charges for 120 DAYS until that amount reaches 5,000. THe biggest scam ever. I am getting another merchant account right now. I charge roughly 5000 a week through them. They will lose much more money by doing this to people than they would if they make if they were honest.


September 3, 2009 05:51 AM

This is just a quick way of paypal to rip off sellers & let the Buyers keep the product for nothing, with a full refund. Sellers are pawns to paypal & ebay. OZtion is Australian & is the way to go.

F PayCrooks!!!

September 3, 2009 07:34 PM

This is the most ridiculous nonsense I have ever heard of. They're doing 20% over 60 days on my account which is essentially 40% since I can't get my money for 60 days! This crazy!!! It's like I'm loaning them 40% of my money while I have to suck it up on my credit card just to keep my store open! I can't wait to get rid of them!!! I've had 2 Chargebacks EVER!!! in 5 years and both were fraudulent sales that I REFUNDED IN FULL!!!! They don't care...A-Holes!!!!


September 3, 2009 07:56 PM

Yep, pay pal can get rich off the interest on the backs of sellers. That is the only reason they are doing this. They already hold money once a charge back is completed. I just had a customer dispute a transaction, even though tracking shows its delivered. The item is for 500+. So, not only do they have 2,500 in reserve, they have kept the 500.00 until the claim goes forward. I am a small seller, I can't afford this. Now, I cant even buy inventory.

The bottom line is this-Ebay and Pay pal are pretty much the same company. They don't give a rats ass about sellers--especially mid to small ones--because they figure there will be enough new people to scam year in and year out. They ONLY care about buyers,because as long as they have people buying, they rake it in. They could care less about driving people away


September 4, 2009 07:22 PM

I just signed up for their Website Payments Pro plan, and received a "Congratulations!" email that I my application was accepted. But (and that's a big but) the offer they gave came with a 30% reserve and 90 day hold on my sales! Granted, the business is new and I have yet to have any sales (hence, my need for a gateway/merchant banking service), but 3 months to sit on my sales?!?! I called them via the phone number at the end of this article, and the rep. at PayPal said that because my business was new, I was in a higher risk category. He also said that my 30% and 90 days could be reduced after an unspecified amount of time/sales, but there is no guarantee of that.

So..... looks like I will be using my bank as the merchant banker and (probably) for the gateway. Would have been nice to use an all-in-one package, but my bank isn't going to sit on 30% of my earnings for 3 months (they release money the next day after the transaction). They will leave it up to me to act responsibly and professionally when it comes to money I earn. So long PayPal......


September 7, 2009 12:43 AM

Well today is the day! Ig to screwed for $2300dlls. off to my reserve.

I had 3300$ in my paypal. and they just took out 2300 straight to the reserve.
Plus I got hit with a 10% daily for 90 days.

WTF is that for, I would understand the 10% daily crap but why did they just hit me with the $2300dlls. why did they take that away.

PP sucks ASS!!

What else can we do??? what are other services can we use instead of Paypal???

Please advice.

I dont understand why they took $2300dlls.?


September 7, 2009 12:55 AM

Well I was hit with the reserve.

I had 3200$dlls. In my account which was limited for no reason.and they suddenly took $2300dlls straight to the reserve.

plus know I'm at 10% daily hold for 90 days.
I have perfect feedback 100% no chargebacks no claims.

This is unbeliable.

Why did they do this???

I would understand maybe the 10% daily to start today but not the hold on $2300dlls. they just took them out and placed them on hold.

PP is making even more money off of us..!!!!

John Tozzi (BusinessWeek reporter)

September 9, 2009 05:52 PM

Thanks for the comments. Since this post went up, I heard a similar complaint about reserve requirements on Google Checkout. If anyone has run into that, let me know in a comment. Thanks.

James Hussher

September 10, 2009 10:44 AM

Paypal charges pretty high rates to allow merchants to accept credit cards anyway. If you are doing more than a few thousand a month online, just get an internet merchant account from a reputable credit card processor. I am an account executive for one and happy to talk further with anyone. I can set up any sort of ecommerce solution you need and save you money.

James Hussher

gloria hutson

September 10, 2009 06:43 PM

Same problem here but I am small compared you all. I have never had a charge back and always give a refund if the customer isn't satisfied. My sales are nil compared to what you all are talking about and I could use the money Pay Pal is keeping to buy some food for my table ($89).

Charlie Xun

September 18, 2009 06:57 AM

Pretty much we have a big problem, as we are a Chinese Group, and conduct a lot of trasactions from our factories directly throught pay pal, they TARGETED 3 of our accounts the same week, 100 % ebay feedbacks, 99 % satisfaction. And they just have now more than 8,000 rolled back usd, we just told , our income is too high compared to the average sum of trimesters. I think pay pal have a good list of excuses to do this, as we never had charge back, and all complains are solved with a new product.
But what we Chinese can do ?
We cannot verify the payments of all credit cards if that is the case, then what people like us can do ?
Dragon Group China


September 24, 2009 04:00 PM

Same problem here. 15% on all sales held for 60 days and also I opened a Vrtual Terminal for £20 per month and they told me that I have to pay it forever or just close my PayPal account. They know I can't close my account as I need EBay - does the word shark spring to mind?? Immoral or what. They are holding a gun to my head. Who would want to be a PayPal member of staff?


September 28, 2009 06:22 PM

PayPal is not a bank, but they are acting like a bank, in fact they are playing at banking without having to abide by ( banking rules.

PayPal’s license as a money transmitter in most states is regulated by statute, they are legally required to transmit the money from the sender to the receiver within clearly defined periods of time. This is law.

PayPal is literally banking on your shrugging and saying “Oh well”. If unchallenged they will continue to grab more and more power and money, because they can.
Recourse, or what you can do

Look up PayPal’s license in your state.
Look up the applicable law in your state. See how many days are permitted for transmittal.
Write to the Department which regulates Money Transmitters, I would send a copy to the State Attorney General too.
Give them PayPal’s license number
Print a copy of PayPal’s Legal Agreement, highlight your points of concern
Tell them about the 21 day holds on eBay
Tell them about the rolling reserves
Tell them about the credit checks.
Tell them about the Legal Agreement which permits PayPal to freeze your account for 180 days with no appeal.

You can read this, shake your head and carry on with your life until it comes down around your ears, or you can sit down and write a letter to challenge PayPal.

State Regulatory Agencies are there to protect state residents, phone calls followed up by written complaints generate action.

As Auntie May says ” Why waste grease on a wheel that doesn’t squeak?”
Isn’t it about time we started squeaking?"

From, not I, but from "Red Ink Diary"



September 29, 2009 01:20 AM

PayPal is not a bank, but they are acting like a bank, in fact they are playing at banking without having to abide by ( banking rules.

PayPal’s license as a money transmitter in most states is regulated by statute, they are legally required to transmit the money from the sender to the receiver within clearly defined periods of time. This is law.

PayPal is literally banking on your shrugging and saying “Oh well”. If unchallenged they will continue to grab more and more power and money, because they can.
Recourse, or what you can do

Look up PayPal’s license in your state.
Look up the applicable law in your state. See how many days are permitted for transmittal.
Write to the Department which regulates Money Transmitters, I would send a copy to the State Attorney General too.
Give them PayPal’s license number
Print a copy of PayPal’s Legal Agreement, highlight your points of concern
Tell them about the 21 day holds on eBay
Tell them about the rolling reserves
Tell them about the credit checks.
Tell them about the Legal Agreement which permits PayPal to freeze your account for 180 days with no appeal.

You can read this, shake your head and carry on with your life until it comes down around your ears, or you can sit down and write a letter to challenge PayPal.

State Regulatory Agencies are there to protect state residents, phone calls followed up by written complaints generate action.

As Auntie May says ” Why waste grease on a wheel that doesn’t squeak?”
Isn’t it about time we started squeaking?"

From, not I, but from "Red Ink Diary"


Wade Gunn

September 30, 2009 12:25 AM

Today I got word via email, not a call, that they will hold $10,000 of my money and 10% each day until it reaches $50,000. Its not rolling, they are holding it and giving it back 180 days after I close my account.

I do a lot of transactions thru paypal and have had chargebacks but no where near $50,000 worth in 6 months time.

Guess I have no choice but to switch to a bank/authorize. I was with paypal for about 10 years also.

Adtastic Hosting

September 30, 2009 02:35 AM

I've been a merchant offering my customers PayPal as an alternative payment source since 2000. In that time I have never had a chargeback or dispute and I have processed on average about $5k a month through Paypal.

They just took ten percent of a $1000 payment and are holding it for 90 days. They have indicated they will take 10% of all payments for a rolling reserve for 90 days. Unfortunately for them, there will be no more payments for them to take 10% of. I have removed PayPal as a payment option from all of my services. I already had a superb merchant account and simply offered Paypal as a convenience to my customers but now it is a detriment to my business and thusly no longer available as a convenience.

If you are looking for a great merchant account with no monthly minimums, no contracts or commitments, $10 monthly service charge, free gateway and everything you can get from any other processor including an emulator if you have to have that as a gateway (although their quantum gateway is great and already integrated with carts like zencart and billing systems like WHMCS) then CBG is the very best and is what I use.

I've partnered with them to offer them to my customers. For more info about this excellent merchant account service you can visit my site:


October 9, 2009 05:45 PM

Well not to top everyone else but I got word today that our reserve now needs to be 250k. Yes 250,000. We deal in travel and we are considered high risk. We process 500k per month. PP makes over 10k from us each month in fees and now they will have a quarter million held. Oh and we can no longer secure the account with a Letter of Credit. So now I have to figure out how to keep our 20+ employees going in the worst economy of my life time and do it with all of my accumulated assets held without any recourse.

technical support

October 17, 2009 10:55 PM

I am running a tech support call center and we are processing over 500k per month with less than 5 percent rate of chargebacks/reversals. We were never notified by paypal before the hold back started. Thank god we have other ways to process, I feel sorry for people out there with no other options. Paypal wants $30 per month for the privilege to use them for processing. But they of course know that they have the best features in the industry and the lowest rates and fastest clearing, and multiple currency options. I used to sell merchant accounts through first data. I switched to using paypal for my business but because of paypals policy of reserves and minimum account balances it put me in bankruptcy. Not to mention the economy stinks, you would think that paypal would be a little more understanding in these difficult economic times

30-90 Ripoff

October 19, 2009 02:50 AM

I have been an eBay/PayPal user since 2000, and just recently started doing a lot of eBay business since January 2009. I get payments of about $25K a month through Paypal. I have 100% eBay feedback, over 1000 transactions this year, and only 1 chargeback of $14 for a buyer that claims he never ordered the item (funny that it got shipped to his credit card's billing address), but PayPal covered the transaction for me since I followed their policies.

I am in the process of building a website through eBay prostores, and wanted to use PayPal website payments pro for the ease of integration. I apply for the account, and I get an email saying that 30% of my payment amounts will be held for 90 days! Not a typo, 30% for 90 days, and they only release Day 1's money on day 91, day 2 on day 92, etc. So I will not even get all the money back until 180 days. So I call them and tell them that no business can sustain that type of reserve, but they insist there is nothing they can do. I ask to have the payments pro cancelled, but they tell me that the reserve will still be on the account. So basically they are saying there is no going back. Ridiculous!

They claim that I am now a risk, even though I will not be putting any credit card transactions through for at least 2 months. I then asked if I can open another PayPal account in the meantime, and they said that is no problem (but I will lose my lower merchant rate which makes PayPal a big ripoff). So they are basically a bunch of morons, because I will just let my account sit unused for 3 months, use the other PayPal account for eBay, and this will make them take less risk? Just for the plain fact that they can do something so idiotic to a loyal customer who has been with them for 10 years, and that wants to use them for all his payment needs, has made me change my mind about using PayPal for my website. I will use them for eBay because I have to, but not for my website(s).

Speaking of which, Does anybody know of a way to not use PayPal for eBay? Can I just use a merchant account? Or maybe give customers the option of paying with PayPal or a credit card through my merchant account?

PayPal, if you are reading this, you have just given up a soon-to-be $1,000,000/year sales account.


October 26, 2009 12:56 PM

To all those who are and have suffered from Paypal's new "reserve" and "rolling reserve" policy, I am a victim also. I am tired of Paypal randomly deducting funds from my account and not notifying me prior. I just filed a complaint with the Better Business Bureau and hope that others will follw and do the same. This is something that should not be taken lightly when it comes to people working hard to earn money and then Paypal taking the money and holding it for up to 90 days or more. Paypal is not even associated with the FDIC and Paypal does not guarantee that while they are holding my funds, that my funds will be safe,therefore I have no protection if Paypal were to collapse tomorrow. In addition, Paypal does not specify anywhere in there user agreement of a period of time they can hold the funds or even specify a specific percentage of the funds they can hold. To me, their practice of "reserving" funds is illegal and should be stopped. Paypal is having financial issues and those of us that use Paypal are now suffering from this turmoil. I encourage you to file a complaint with the BBB if you are suffering from the reserve and the more complaints the BBB gets for this reserve issue, the better.


October 27, 2009 12:05 PM

I've been hit with a 30% reserve requirement, and since my account was only used as a merchant processing account (I have a separate bank account), paypal is now holding 75% of all future transactions until I hit my target reserve. I had $20K in the account, and they proceeded to capture $15K. Then, when I threatened to leave the company, they captured the additional $5K!! Further, they put an alert on my credit report for the business, flagging it as a "high risk" business. I feel like a criminal, when all I am doing is renting out corporate apartments! Can anyone help??


October 28, 2009 03:21 PM

I've been reading a lot of complaints here and I've noticed that a lot of people have been given a variety of reasons by paypal as to why there account has been affected by this rolling reserve.

When I applied for my virtual terminal account never did I see during the 5 step process an honest up front notice about their rolling reserve policy. Though in the terms and agreement article #11 there is mention -small print- of a rolling reserve that will affect your account. What PayPal fails to do is bring this to our attention UP FRONT prior and after the application process.

Back to the reason why paypal has taken this initiative to take a percentage from our sales. In my case I was told by a paypal rep that the rolling reserve would not take affect once I have faxed them my California ID for security purposes. There after remove the rolling reserve from all sales. That was a lie.

I called yesterday and the reason they gave me for why the RR is in effect is because of seller's credit scores. The lower the credit score the higher the percentage they take for their RR account. Did they mention this to anyone here?

I made another call and was told that the declining economy was the determining factor for the RR. It's obvious how much they care about seller's. Those people on the phone have a job because of us.

I was very angry and I believe that 30% in my case is sucking the blood out of my business. Thank God I only processed $300 from my $2,000 sales.

We need to organize a class action lawsuit. Would people here be interested in meeting up at a park in San Diego and organize ourselves with a plan?

The best thing now is to boycott paypal and ebay. I understand there are those who have deeper issues. All of us have been affected in some large or small way. Either way paypal has taken our money and it's not just sitting there for our protection. paypal is gambling and investing our money for their own financial gain.

To get our money NOW with mandatory interest up to 30% we MUST file a class action lawsuit immediately.

Now for some good news. I found INTUIT as a better source for online credit card processing and for online merchant services. INTUIT only charges $12.95 per month - first 2 months free- compared to paypal's $30 per month.

If you have a website with which you draw sales from then INTUIT's monthly fee is $19.95 per month. Not great though it's better than a rolling reserve.

Here is INTUIT's link -

Good bye for ever ebay and paypal...well until January 28, 2010, this is when my RR of $96 is deposited to my account.


November 1, 2009 09:15 AM

I have NOT received any notice at all. They applied the reserve without prior notice.

They kept repeating the same extract (copy paste from wherever) and no resolution.

I am from the UK and I need to understand what are the legal requirement in the UK for companies like paypal for the defined period of time to transmit money between senders and receiver.

I will be speaking to the FSA and log a complaint as I am fed up with PayPal and their stupid rules, I have NOT got a single dispute on my account, not a single negative feedback on ebay and I do not understand the reason why and they can not even supply me with the reason either!


November 2, 2009 07:40 AM

I am in exactly the same boat as you.
We trade a fair bit on Ebay and sell process around £10k per month through here.
Paypal Europe sent me an email at the start of last month saying they we holding £1700 (non interest bearing) for 180 days from now on - with immediate effect due to my high risk nature of business. In the 5 years I have been with Paypal they have never had a chargeback or complaint and I sell furniture....not exactly relpica rolexes! I also have 100% feedback on ebay and am a top registered seller. What can I do?
I have spoken to 4 different Paypal business staff on their helpline and all give me different reasons as to why this has happened. Each time I am promised a call back from a senior member of staff and so far nothing.
I asked the last Paypal person if I could record the call for my records (as they do) and they flatly refused and couldn't put me through to any of their colleagues willing to be taped.
I am fed up with this. What choice does an honest Ebay seller have?


November 5, 2009 08:05 PM

Paypal is holding over 80,000 from us.

We do about 50,000 per month on paypal.

They want to hold 100,000. We obviously stopped dealing with them completely.

We took them off our web site a few months ago and switched to google checkout.

Our customers preferred google as the credit card alternatives. We were getting a bit over 14% on paypal. Once we switched, google checkout got over 21%.

PayPal was trying to collect 5% of all sales until the account reaches 150,000 and hold that huge sum as a minimum reserve.

Once PayPal has you in your cross hairs, they will never release your money.

Dont waste time trying to work with them. We wasted a year and now have to wait an additional couple of months to get our money back.

Google Checkout and others provide a far superior interface and better over all experience for buyers and merchants.

Bobby Redspell

November 6, 2009 05:48 PM

The papal changes in this thread are really starting to hit home with many businesses.

The more online businesses that realise that paypal are doing their utmost to scam their fee paying clients for many thousands of £'s or $'s the better.

There are other online merchant facilities available check them out and use them.

Paypal is the buyers/scammers friend, you the seller are their fodder.

I'm only a small retailer but Paypal decided I needed £10,500 left as a reserve. so Google checkout here I come ;-)


November 6, 2009 10:15 PM

Yep hold ours no chargebacks ever for years. It's just a scam to hold money and collect interest on it. They can claim it's the economy and try to make it all legit but it's a crappy scam.


November 7, 2009 09:41 AM

I don't see and FDIC logo with PayPal. Shouldn't there be some sort of guarantee on these funds? I understand their reasoning, as well as the merchant account processors.

I just want to know I will get my money back when they fold.


November 25, 2009 02:59 PM

I applied for the Website Payments Pro and PayPal immediately slapped the 30% for 90 days RR on my account. Told them after review, I didn't need the WPP, they said fine but the RR still stands. Asked for a review and appeal, they said no can do for 60 days. Have been using PayPal since 2000 with no chargebacks and 100% feedback on eBay. The agent I talked to even said he couldn't see why the reserve was put on my account because I'm not high risk. But 30% is more than I make in profit, so now I have to operate my business at a loss for the next 90 days? The nice thing about PayPal was the debit card integration, but I can't survive their business practices. Looking for an alternative now.


December 6, 2009 10:01 PM

America lives on Small business, and American needs small business help this economy and if paypal is preventing it , we must address this on With enough views and attention, CNN will turn this into a coverage.

If there are any good writers that can post a article on, we will all join in to get this message across to rest of the world. What paypal is doing is illegal and will ruin peoples lives. holding 20% for 60 days can run my life in poverty. most people live on single checks week by week. Holding $1000 means that a person will go into poverty! You guys have to understand this is a major issue . Paypal is committing a crime by holding payments that's not theirs. All we had asked paypal to do was accept our payments in return for a fee. but now they are holding our money, and probably financing our money to make interest off of them. They are probably lending money out to banks and making more money out of your own money. THis is a interesting news to be posted on and it should get massive attention. Have a descriptive title stating should get attention. This is undemocratic and needs to be addressed.


December 7, 2009 09:11 PM

If you remove virtual terminal - you won't have the rolling reserve. Just use payment pro for your transaction using the API calls.

the Geek

December 19, 2009 04:36 PM

Yeap I have had Paypal for over 8 years. In that time I have never had any issues with charge backs etc. When I applied for virtual terminal they applied a rolling reserve of 30% to ALL transactions on my account. That's right all transaction have 30% held. All I do to live is fix peoples computers, as a convenience I was offering paypal as an option now not a chance. No more paypal for my clients, 30% means after I pay taxes etc I will only see about 45% of my money


December 23, 2009 04:27 AM

What does this mean for me?
Based on risk reviews, your reserve will be set at 10% of the received
volume for each day, and held for a 90-day rolling period. This will be
applied to your account within the next 24 hours.

Loyal PayPal Customer

December 23, 2009 05:24 PM

We're a vacation rental company. We own and manage apartments that we rent out short term. We have over 300 properties worldwide. We've been using PayPal as our single merchant account provider for 6 years now. We process about 100K per month.
An email came about a month ago, "Based on risk reviews, your reserve will be set at 10%..." FOR 6 MONTHS!! IT MEANS THAT THEY WILL BE HOLDING AT LEAST 60K IN SIX MONTHS. And then they can re-evaluate and increase it to 20, 30%

Why now? Why all the sudden PayPal needs all this extra money to play around with?

We're signing up for an alternative processor right now with Paymentech specializing in rent payments. Processing fee is 1.99% FLAT for our industry (PP charges 2.8-3.8%) which was all the sudden beleived 'high risk' by PayPal. This new processor doesn't charge a minimum transaction fee (30 cents with PP) and no reserve!

Again, the question is why all the sudden they are more interested in taking a quick 10-20% from us all, than processing their 3% steadily over many more years to come. Yes, they can make interest on that money. What else? Oh, there it is, they are NOT FDIC INSURED!!! THEY DO NOT EVEN HAVE A BANKING LICENSE!!! So if they go under they're just gonna take your money. And if you're holding that much money with no real liability, maybe they will want to go under. Launder the money out through their Money Market Fund, oops the company is bankrupt, and all the CEOs are tanning on some expensive Island.


Henrietta - Red Ink Diary

December 29, 2009 01:05 PM

A compendium of Red Ink Diary's 2009 articles on PayPal's rolling reserves may be found at which will take you to the specific post at

Filing a complaint at the Better Business Bureau is a waste of time and effort. The BBB has no statutory authority and is supported by dues from members who pay according to the size of their business. Both eBay and PayPal are members of the BBB.

Please visit my article "Making Noise Successfully - a Primer" which contains many useful and productive links.


January 5, 2010 04:00 PM

Paypal is screwing us hard. We are running a bass fishing tournament and took the entry fees via Paypal. They never notified us of any "reserve" and are holding $20,000 of our $30,000 we received in sign ups. There has never been a charge back on the account - we were never notified of it - and They took over 60% of the money we received and are holding it on us. Luckily we don't really need that 20,000 until August - so we have time to file suit. Anyone interested in joining the suit can notify me at

Also, all payments have been received over the past 30 days - I think we can refund everyone their money and then collect from them another way. That actually might be our best option... anyone have any suggestions? I am all ears, email me!

Screw PayPal

January 7, 2010 10:57 PM

Response to:
December 7, 2009 09:11 PM

If you remove virtual terminal - you won't have the rolling reserve. Just use payment pro for your transaction using the API calls.

---Yes, that's what they told me to. And then someone else from PayPal said they wouldn't remove the reserve.
They are holding my money that's more than my profit margin. Over 8,000 dollars now!

They just put me out of business. Maybe I'll just apply for a job at PayPal and ruin them form the inside! Just kidding.


January 12, 2010 10:10 AM

I AM AN ATTORNEY AND THIS IS UNCONSCIONABLE. We do a minimum 25K through Paypal each month and they have slapped us with a 90 day 30%, yes 30% reserve. I was told the reserve was for the Virtual Terminal too, then I was told it was just my Merchant account, not my personal account. I was told to open a personal account. I was then told I would have the same 30% reserve on it because they wanted "to simplify accounts" What is that supposed to mean? They are now not returning calls or emails and I cannot get a specialist on the phone and my contact is not answering or responding.

It says high dollar accounts will receive a phone call. Wrong! We received an email after the fact in both cases and money was taken retroactively from the day prior sales too.

We have only had 2 chargebacks in the past year and Paypal(as opposed to what they say) declined to fight the credit card company even though we had tracking and delivery confirmation and the buyer said they received. In both cases the buyer tried to say they did not get what they ordered and when we provided tracking with confirmation and signature, paypal found in our favor. Then they filed a chargeback with their credit card company and paypal said, "Sorry, we tried to pursue on your behalf but the credit card company found in their favor in the interest of customer service and their decision is the ultimate decision so we are giving them your money." In actuality, all buyers have to do is file a chargeback and paypal will side with the credit card company even if you follow their rules for protection.


January 13, 2010 04:33 PM

I cant make my payments because they are holding more money in my reserve then I have in my account. Ridiculous!


January 20, 2010 01:31 PM

They are holding 30% for 90days. PLUS they do not use this money if a client does need a refund....refunds are still being issued out of the "available funds".

I have contacted my state banking authorities and also my state representative. Please remember that Paypal is NOT FDIC insured so if something happens to them our rolling reserve monies will go with them and we will have no recourse!

Avid Reader

January 25, 2010 03:31 AM

Paypal was required by many states to file for a Money Transmitter license.
They are required to transfer monies within x amount of days.
Rule of law trumps any User Agreement they think they can get away with.

Check with your state to see if they have the required license and if it's expired you need to file complaints with your state authorities.
Many of them have expired and they are doing business illegally.


January 25, 2010 02:03 PM

what lie can they come up with next.
glitch my but

they stole 2197.00 from me.and i had sig confirmation. is this the company you want to think highly of.


February 15, 2010 11:29 PM

Report them to your State Attorney General with all facts related to any money they "reserve" from your account under the guise of "rolling reserve." They are neither a bank nor a credit card processor, per se. They are a "Money transmittal service". Define the word "transmittal". They are simply and legally acting as an agent to transfer a payment from A to B. Failure to transmit that payment in full is simply tantamount to fraud. Here is the states they are icensed in: If your state is not on the list, even better most likely. Also see: for some interesting info on how they define themselves. However, most likely, if you contact your Attorney General you will get some very good action on this and shake the tree.


March 5, 2010 03:58 PM

well im the most person in the whole world paypal pick on,they hit me with a massive 50% of my daily income for no reason and no explanation,a bloody 50% how the hell im gone to restoke,i got a shop in ebay,i was doing well untill paypal come up with this crap 50% for a roling month ,i dont know for how long they gone to do this,Google Please announce your auction site so we can move on from the ebay,and sod them both paypal and ebay.
Is any one else got hitby the same amount as me,i never had any charge back or claim back or even a comlpaint through paypal.


March 21, 2010 04:50 AM

I too was hit with 5% rolling, and they are holding $4,000 for 45 days. They sent the email notice the same day they held the money. No fair warning. How in the world can pay my bills for the products I sell on eBay now?! It seems like they want to put all their sellers out of business.

The Salvage Yard

March 22, 2010 03:12 PM

i have just been informed by paypal they are with holding 20% for 90days on my account.

when i called them they told me they could not do anything about it..i only have to give a refund three months ago in full and there was not a problem...when i applied for there merchant services this is when it came into force..

when i asked them would they give me interest on my monies they told me NO!!

now i have left paypal and will never use again under principle.

simon hamill


March 23, 2010 01:57 PM

Same thing just happened to me. I had one person with 0 feedback complain, and now they are holding over $1,500 of my money. I was told the account is permanently limited. FOR WHAT REASON?

Do what I did, sue them in small claims. I filed my paperwork today.


March 26, 2010 12:32 AM

That's the biggest problem with paypal really; customers are just a number and if anything goes wrong they just hit people up with increased reserves. Even larger merchants are affected by that.

There's a lot of alternatives to paypal though; I'm working with and they have a special paypal program to make it easy for people to switch from paypal.

Also, if you want some valuable insights on how you can reduce your processing bill, check out the blog:


March 26, 2010 12:04 PM

how about 10% for 120 days. Just to give you an idea. This has been going on for 6 days now and 10% of my daily paypal transactions is $200 per day. As of today, day #6, they are holding $12,500. Now thats not the worse part. Think what that amount will be at the 120 day mark? Yeak $250,000!!!! Then only $2,000 a day is realeasd so they will at all times be holding a quarter of a million dollars of my money! When i went off on them, they said that they find it hard to believe my business couldnt absorb that and that if that was the case that i needed to be making a higher profit margin....well guess what...if i wasnt paying 7.5% in ebay fees and another 2% in paypal fees...i'd be making 10% more money! What can I do now?

Conference Chair

March 31, 2010 05:32 AM

I am organizing an international conference and charging for tickets using Eventbrite. About a month ago I was informed that my Paypal business account was limited until I provided proof that it was a legitimate business, which I did straight away. This is not my first conference, and they have been very sucessful, with 0 complaints and chargebacks.
I finally got my limitations "lifted" to find that they are holding my 40k as a minimum reserve until my conference is over - very useful since I'm organizing it now and need income to pay for travel expenses, venue... AND they are also holding a 100% (you read right - all of it!) rolling reserve of the tickets sold from now on, for 60 days... AND they require that the amount of tickets sold is the same they had put on reserve, so if in one day I sell 3 tickets and that money goes to that rolling reserve, I get automatically a negative balance for the same amount until I sell more tickets! It's unbelievable! This will ruin my conference, my business, everything! And I will end up PAYING paypal the amount of the last day of tickets sold in order to be able to get my money back, 60 days later!


April 1, 2010 02:30 AM

i am a power seller and top rated seller on ebay,paypal has me on a rolling reserve for 6 months,what can i do?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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