First and foremost, it is important for all current and possible future PayPal users to understand what PayPal is, and what you need to be wary of while using PayPal and other online payment gateways (often called PayPal alternatives). While similar problems are faced by almost all Non-US PayPal users, I’ll be citing examples from an Indian perspective since I’m most familiar with them. But people from the United States should also read this post, since I’ve explained some of the problems faced by US PayPal users and how all internet users can secure their Online Payment related accounts.
What is PayPal?
PayPal is an online payment service. It is an intermediate system which allows you to send and receive money using an email ID, without revealing your bank and card details. Thus, you can safely carry out online money transactions in several currencies including INR (₹), USD, Euro, CAD etc.
PayPal allows you to add your bank account information (multiple accounts for even greater convenience), credit and debit card information etc. so that all future payments/ transfers can be carried out without revealing all that to the sender/receiver of funds. Almost all websites like online shops, ticket reservation websites, web hosting company websites, domain registration websites etc. accept payments through PayPal.
What PayPal is NOT
PayPal, although for all practical purposes acting like an online bank, is NOT an actual banking institution. It is just a payment gateway, in which you can deposit money for future use, and withdraw funds when you need to. PayPal doesn’t pay you an interest for the amount of money you deposit in the online account.
So, it is advisable to withdraw the funds when you don’t need them in the foreseeable future. PayPal is not a service where you can make profits off Forex fluctuations, and the service charges would by far exceed any fluctuations.
What is different for Non-US (including Indian) PayPal users?
As it is, PayPal only allows US Bank Accounts to be used for uploading funds to the Online Account. Thus, Indian and other Non-US PayPal users are restricted to using Debit cards and Credit cards (also Virtual Credit Cards or VCCs). To compound the issue, Indian banks like State Bank of India (SBI), ICICI Bank, HDFC Bank, Punjab National Bank (PNB) etc. issue debit/ATM cards which cannot be used to transfer funds online except on a few sites like local Online Retail Shops , Railway and Air ticket reservation sites, Tax payment website etc. Also, PayPal debit cards cannot be used by Indian citizens. So, you definitely need a foreign bank debit/ATM card (Citibank) or a credit card to upload funds to your online PayPal account.
Since PayPal is not an actual bank, the Reserve Bank of India has tightened regulations concerning Forex deposits and monetary transactions for Indian citizens, affecting Indian PayPal users. The tightening of rules has been justified by the RBI as necessary to track the flow of monetary funds within and outside India, and to protect the national economy from imbalance in Forex deposits.
The Forex angle is pretty fair, since the conversion of US Dollars and other currencies into Indian Rupees or INR and vice-versa online through your PayPal account won’t be taken into account when calculating the Indian Economy’s Forex Reserves. Since there are millions of PayPal users across the globe, the problem is also faced by other economies.
The RBI also objected to long periods of deposits of Indian citizens’ money in their online PayPal accounts, since the cash reserves could be used by PayPal for accruing interest which it doesn’t pay to its users or the national economy. Only banks are allowed to have deposits for such periods, since they have to account for all transactions, while PayPal doesn’t have to provide any such information, and is not bound by other regulations for banking institutions like State Bank of India (SBI), ICICI Bank, HDFC Bank, Punjab National Bank (PNB) etc.
Consequently, PayPal has enforced some new rules for its Indian users. Let’s take a look at them:
- Withdraw all received funds within 7 days/ 1 week: All Indian PayPal users must withdraw the balance in their online PayPal accounts within 7 days of receiving the funds. I’ve not tried breaking this rule and neither should you.
- Indian PayPal users cannot accept payments of over USD 500 in a single transaction.
- Can’t spend PayPal balance online directly: Indian PayPal users can’t spend the funds in their online PayPal account to buy anything, including paying for web hosting and domain registration/ renewal, online shopping on sites like Amazon, eBay etc. All Indian PayPal users need to use a credit card/ debit/ATM card to purchase anything online.
Is PayPal worth it? (Alternatives to PayPal)
While PayPal is currently the most used Online Payment Gateway, its users all over the world, not just Indians or Asians, are increasingly getting dis-enchanted with PayPal as better alternatives come to the forefront. In recent years, the alarming number of refund requests and charge-backs on credit and debit cards has made people a lot less comfortable with PayPal. Problems faced by PayPal users globally including the US include Freezing or locking down of account, long waiting periods for getting verified through bank accounts and credit/debit cards, lousy customer support in case of inquiries regarding the various problems in integration of PayPal with websites and identity verification etc.
Perhaps it is a consequence of the quasi-monopoly of PayPal in the online payment gateway market, that has led to an ever-falling quality of customer support. MoneyBookers.com, a UK based PayPal alternative, is better in terms of transaction, deposit and withdrawal fees/charges. Moneybookers.com also allows its Indian users to directly upload funds to their online accounts through electronic fund transfers using the SWIFT codes of their bank accounts in State Bank of India (SBI), ICICI Bank, HDFC Bank, Punjab National Bank (PNB) etc. Withdrawal is also very easy, and bank wire transfer and online account to credit/debit card transfer are the minimum options available in all countries including India. There is no restriction on the number of days you can keep the funds in the online MoneyBookers.com account either.
Clearly the only reason so many people still use PayPal is because other alternatives are not as widely used/ accepted. Unless it adds new incentives, PayPal is bound to sooner or later give way to other services like AlertPay.com, Google Checkout and MoneyBookers.com as the leading online payment websites.
How to Keep Your Online Payment Websites Safe and Secure?
- Before logging into PayPal and other such websites, check the URL/ Address bar at the top of your browser to confirm that the website is genuine.
- Also, the address must begin with HTTPS or HTTP Secure (Hyper Text Transfer Protocol Secure).
- Do not click on any links to go to these websites to avoid giving away your account information to phishing websites.
- Bookmark the homepage of these online payment websites for easy and safe access.
- Do not use passwords similar to those in your email account(s) or other websites.
- Make the passwords complex with special characters instead of normal letter. Also add numbers and/or blank spaces to make the passwords even more secure. Don’t worry about forgetting the passwords since you can easily reset them online.
- Do not share your online payment websites’ information with anyone else.
- Do not use the email account linked to online payment websites for other activities like a subscription to blogs, websites and newsletters as far as possible, to avoid getting spam and scam emails. Some spam/ scam emails are addressed as having been sent from PayPal and other such services to try and get your financial information. Several people have fallen prey to such phishing attacks.
Please share your experiences with PayPal and PayPal alternatives as comments, and feel free to ask any doubts or queries regarding online payment gateway services and websites.