What Can You Do If PayPal Holds Your Funds For 21 Days? Gamble With It In Their Money Market Fund

EBay’s highly criticized fee changes—lower listing prices but a 67% increase in seller fees—kicked in last week, and next month eBay’s payment service PayPal will start holding certain deposits for up to 21 days if PayPal considers the transaction “high risk.” PayPal earns interest on any money it holds—and it’s perfectly legal because PayPal is a deposit broker and not a bank. If you do find your money stuck in “high risk” detention, there’s only one way you can attempt to earn money from the delay, and that’s by sticking it in PayPal’s Money Market Fund.

Although PayPal earns interest on the money it holds, it’s not very much when compared to the rest of the company’s revenue streams. PayPal doesn’t release data on how much it earns in interest, but outside analysts estimate it’s less than $10 million per quarter—”a drop in the bucket” compared to the $1.8 billion PayPal earned in 2007.

None of that matters for sellers, though, who will now run the risk of losing access to funds for up to three weeks, even though they still must ship the sold item.

What is sparking reactions ranging from annoyance to panic among some of eBay’s sellers is the company’s criteria for determining what transactions fall into the “high-risk” category. Factors beyond sellers’ control, including the number of “feedback” comments they have from previous buyers and how many of those comments are positive, can trigger the freeze.

“It’s like a bad dream, really,” said Dana White, an eBay seller who lives outside Ocean City, Md., and deals in used clothing, shoes and accessories. “I’m a small seller. All I need is two negatives in a 30-day period, and they will hold funds.”

If you started selling within the past six months, have a low number of feedbacks, have had too many instances of negative feedback in the recent past, or are selling a high-priced item or charging a high shipping & handling fee, you could earn the high risk designation.

PayPal’s representative tells CNN Money that the one way you can put that held money to use for yourself is to enroll in PayPal’s Money Market Fund (download a PDF of the prospectus here):

PayPal’s Pires said accountholders should be aware that they have the power to collect interest for their own use on delayed funds. It’s as simple as enrolling in the company’s PayPal Money Market Fund, Pires said.

For enrolled accountholders, any funds earmarked for a hold are diverted into the Money Market Fund rather than PayPal’s corporate bank account, Pires said. The dividends earned are credited to user accounts on a monthly basis.

“Every U.S. accountholder has the ability to invest in the Money Market Fund,” Pires said.

PayPal’s Money Market Fund is run by Barclay (BCS)’s Global Investments. No minimum balance is required, and the fund’s current interest rate is 3.46%.

The other solution, CNN Money notes, is to abandon PayPal (and eBay along with it) and go with an alternative e-commerce solution—they list five potential candidates on their website.

“What PayPal does with your money” [CNN Money]
“EBay’s PayPal funds freeze plan draws fire” [CNN Money]

Basic Fee Changes [eBay]
“eBay raises seller fees 67% on the cheapest items < $25.00" [eBay Forums]
“PayPal’s 21-Day Hold Policy for eBay Sellers” [Auctionbytes]
“Putting The PayPal 21 day Hold Into Perspective” [Skip McGrath]
“5 PayPal alternatives” [CNN Money]
PayPal Money Market Fund [PayPal]
(Photo: St0rmz)


Edit Your Comment

  1. vr4z06gt says:

    just another reason to say fuck ebay and paypal, what the hell ever happened to google getting into the auction business and rescuing all of us from this misery.

  2. batdan says:

    To be fair it seems in the past the buyer has assumed most of the risk. I mean I can send money and hope the seller sends what I wanted. It isn’t the case where the seller would send the product and hope I would send the payment.

    If sellers scamming people got out of control enough, eBay would be forced to start seriously finding ways to make things safer for buyers. Frankly I see tons of items on eBay I would never bid on because I consider them too risky.

  3. ivanthemute says:

    Fuck PayPal. I haven’t used their services since the debacle when they froze the SomethingAwful forum donation fund for 9/11 victims, and I’m not suprised that these assholes are pulling this kind of shit now.

  4. forgottenpassword says:

    Ahhhhhh… so its TRUE that paypal earns interest on the money in accounts it freezes. I once read someone’s theory tht stated that is exactly why paypal is so quick to freeze someone’s account for an “investigation”. If you did this with many many accounts… you can make a shitload of money off the interest alone!

    aLSO… I guess this puts an end to sellers who immediately withdraw money from their account to prevent a dishonest chargeback by a scammer buyer.

    Nice paypal…. you just managed to screw your customers over even more.

    THIS will definately keep me from selling anything worth over 50 bucks on ebay in the future.

  5. BPorche says:

    Personally, I do not like PayPal but since it is convenient I hope that Paypal allows it’s payee to earn the interest on money that is being on hold.

    On the other hand, Paypal does not consider itself a banking system but more of a money exchange system so they do not have to follow the banking industry guidelines. They can keep the money as a hold and do whatever they want as long as they deliver their guarantees.

  6. Rectilinear Propagation says:

    That rabbit definitely disapproves of Paypal’s shenanigans.

    It’s like they don’t want any more customers.

  7. azntg says:

    I’m not sure when exactly is the best time to start moving away from eBay and Paypal… I think it’s now though.

  8. Laffy Daffy says:

    How can the bastards continue to get away with shit like this? Paypal should be forced to give up the bullshit and incorporate as a bank.

  9. UnStatusTheQuo says:

    Where the hell is the open market alternative when you need it? I mean, seriously… who competes with either of them…. Yahoo! auctions?


    Well, for me, it’s craigslist and cash. Guess what % of each sale I have to give away… zero. Sure sure it might not sell, but I’ll just let it expire, and list it for free again next week.

  10. Falconfire says:

    You know its hilarious.. I honestly wondered how Google could ever compete against Paypal, be it they just started and Paypal has existed for ages now….

    Seems Google doesnt have to do much, Paypal just needs to screw the pooch so hard that they kill themselves.

  11. my_pergina says:

    I freakin hate Paypal with a passion. I personally haven’t been screwed over by them (YET). But from reading other people’s expreiences and talking to their ridiculous customer service… I can safely say that they suck ass.

    When are the Google guys going to get in on the action? Don’t those assholes know they could make even MORE MONEY by offering an ebay/paypal service. Their wouldn’t even be any competition. Google would just have to do things right and then everyone could tell Paypal to go eat itself.

  12. QuantumRiff says:

    So if Ebay holds your money for you for 3 weeks in your money market account, and for whatever reason it gets returned to the purchaser, do you keep the interest money? How does that work?

  13. Buran says:

    @Falconfire: Google did come out of nowhere and is now dominating the markets it’s in. Not impossible.

    Only thing is, ebay has cornered the market on auctions and BANNED Google Checkout (yes, that’s right, they outright artificially block competition) from ebay auctions.

    I think it’s going to take Google opening up their own auction site to fix this mess. Assuming they “do no evil”, of course.

  14. Trick says:

    I never liked PayPal but I use it with eBay. I know all the horror stories and I use an account that I don’t keep in money in and transfer whatever I get out of the account right away…

    I was even hit by a stupid Indonesian scammer back in 2000. I didn’t lose any money because I got suspicious of the buyer and refused to ship or return the money. PayPal took it back about 30 days later.

    I hardly used my PayPal account over the next seven years until 11/2007. That was when I sold off some old Apple notebooks and computers on eBay…

    So far I have brought in close to $5000 and I did get a call from PayPal in January. The CS was semi-combative and was demanding to know where I was getting my computer equipment…

    Well, I kept asking why it was any business of hers or PayPal’s and finally she said because they wanted to verify I was actually selling the computers and delivering them…

    By that time about 75% of the auctions people won had already received their loot and left positive feedback so I told the CS lady just that. She then confirmed my statement and asked if I had any more to ship… I said yes they were being prepped as we spoke. She thanked me for my time and hung up…

    I thought for sure PayPal was going to go ape-sh*t on my account but they have yet to do so… I just sold two more items today and everything went well, I paid for the shipping with my PayPal debit card (so I could earn back a little of the fee’s I had to pay!) and transfered whats left to my bank.

    Once it is there I will move it out of there and even though things have went well for me with PayPal, I don’t trust them and I still really don’t like them.

    Thank god I don’t have to do this regularly!

  15. BigBoat says:

    Guess who voted PayPal the worst company of 2007! Maybe I should work on that 2008 speech, although hopefully they won’t be around to accept the prize.

  16. Jthmeffy says:

    honestly, the people selling should just put a disclaimer in their ebay page noting that if, for whatever reason, paypal decides to hold the funds, the item will not be shipped out until the date in which the funds are released and confirmed

  17. LatherRinseRepeat says:

    I’m probably missing something here.. But I find it odd that real banks don’t offer an electronic payment service for auctions and such. If WaMu, BofA, credit unions, etc. banded together to form a trusted person-to-person payment system, they could crush Pay Pal overnight.

    Good idea? Bad idea? Anyone have an opinion on this?

  18. MickeyMoo says:

    @LatherRinseRepeat: Good idea in theory except if the crumbling money hungry banks got their mitts into it the fees would be usurious.

  19. kalmakazee says:


    What a stingy company!! Us ebay sellers do all the hard work and Ebay takes all our hard earned money and runs laughing all the way to the bank!!


  20. kalmakazee says:

    Where is google when we need them?

  21. gfinakoma says:

    this is fucking redic!! i’ve had it with them.

  22. PingPongDarts says:

    I’ve said it before, but Paypal is beyond terrible. There are entire sites devoted to documenting and helping those who have been screwed over by their business practices. I personally had $1,500 of my money earned as a seller put on hold FOR HALF A YEAR because some jerk tried to scam me and claimed I was cheating people. I was able to prove him wrong and Ebay/Paypal nullified his comments, BUT STILL KEPT MY MONEY. Had I not been persistent as hell, I would have never seen my money 180 days later.

    I would love to start selling my old/unused items online again, but as long as Ebay and Paypal hold the monopoly, in the attic they will stay.

  23. Snarkysnake says:


    Well,its not much,but there is a pretty good alternative that i have used a couple of times…

    ING Direct has a “paperless” checking account that’s called Electric Orange. When you owe somebody money,you log on,enter the name,address and amount and they will send a paper check to that person (they even pick up the postage). The good part,the part that would thwart scammers,is that ING will not send the check unles they have good funds in the account to cover it .The money comes out immediately,so they will not let you write hecks for money that you wish was in there.The recipient knows that the check is good,so they can ship immediately.Fees ? None. Hassle? None.

    I have completed about 50 transactions with this and there’s never been a hitch.

    Paypal, If you are reading this,I am really enjoying the money that you are never going to see from me!
    (Nelson Muntz voice) Ha! Ha!

  24. privatejoker75 says:

    I’ve done a lot of business through paypal because it was my only option. The last straw for me was when I received $500 from a known associate. When i went to withdraw it i was told that the “transaction was suspect and my account was locked until it could be reviewed”.

    My account and my $500 was frozen for about 10 business days. Repeated phone calls did nothing. Luckily they decided the transaction was ok otherwise i would have been out $500

  25. hititorquititornot says:

    The other solution, CNN Money notes, is to abandon PayPal (and eBay along with it) and go with an alternative e-commerce solution-they list five potential candidates on their website.

    So, what this says to me is that, paypal exists for one reason, people use it, and the company makes millions of dollars…so if you don’t like them how about instead of complaining about them on forms you stop using them?

    remember when ebay first came out and 90% of sales were via money order or check? Why don’t you just stop offering paypal, if your item is good enough I’m sure more people would buy.

  26. BenPoopken says:

    Don’t just stop using them. Cancel your accounts.

  27. Parting says:

    @Snarkysnake: Unfortunately, it works in USA only. It does not help people who are located in Canada or Europe.

  28. Parting says:

    @Buran: I doubt that Google will do worse than eBay. rBau blocks competition, and PayPal is free for all, it works great for scammers, and they suck for honest people.

    I’ve been scammed as a buyer,and as a seller. Now, I do most of transactions on craiglist and kijiji. Both are free.

  29. Snarkysnake says:

    Sorry,didn’t know that.

    Sellers are going to have to find ways to sidestep PayPal,however. This new policy is so vague and PayPal is so arrogant (they make AOL’s mid 90’s service look like a model of customer friendly efficiency),that this is a license to steal. No way I would want to be a seller in that situation-you are truly a hostage to the feedback of scammers and whiners.

  30. homerjay says:

    Hell, I’d take Comcast Auctions or Haliburton Auctions over Ebay and Paypal if it’d help!

  31. Andrew says:

    Last I checked, using the “Money Market Account” thing requires that you give Paypal your Social Security Number. No thanks.

  32. Anks329 says:

    My solution, continue to sell on ebay; but with the higher ending fees increase the shipping costs to offset it, and only accept money orders no paypal. That, or list on Craigslist only…

  33. nursetim says:

    My wife won a video game on eBay back on Feb 6, and sent payment through Paypal the same day. Fast forward to last week, still no game, no response from buyer. I noticed he had 0 feedback, so I opened a dispute. The next day, I get a message from the seller saying he couldn’t transfer the money to his account to pay for shipping. This new Paypal policy was likely the reason, so I will have to apologize to him when I receive it.

  34. jamar0303 says:

    Yahoo Auctions FTW.

  35. Erwos says:

    The problem is that eBay has no serious market competition. If Google or Microsoft got into auctions in a big way, and got it right from the start, there would be a lot more pressure on eBay not to do huge fee hikes.

  36. mopar_man says:

    This is getting ridiculous. For the last couple years, I’ve tried to steer clear of PayPal as much as possible and only accept/send money orders. I don’t know if it helps any but I sent an e-mail to Google to start up an auction site. :P I’m sure it probably isn’t the correct route but I went here:
    [www.google.com] and chose Business Proposals -> Share a suggestion/idea. I don’t know if it would get you anywhere but there’s always the telephone option: 1-650-253-0000

  37. homerjay says:

    @jamar0303: Yahoo Auctions closed up shop last year…

  38. efolgate says:

    Paypal should be on the poll for one of the worst companies of 2008. They don’t protect both parties in a transaction. They let credit card companies do whatever they want with funds in paypal accounts, the fees are getting ridiculous. The only thing I use paypal for is to send/receive money and keep it in there for the money market interest and I like the debit card that they give you. But in terms of using it to buy things online, it’s not worth it.

  39. ornj says:

    I don’t see how Paypal can hold your money like that.

    A couple of years ago I had an incident with Paypal where their system was attempting to transfer an “echeck” of $700 and for some reason attempted to do so three times over drafting my bank account by over $1000. When I called I of course got outsourced

    customer service who basically read back to me the same information that was available on their web site but though a very thick accent.

    Long story short they told me I couldn’t get my money back for 21 days and I decided that since they kept deducting money from my account, I would go down the to bank and put a hold on my account so that Pappal couldn’t transfer any more money. I told the branch manager at Citizen’s Bank what was going on and he credited my account to bring it up out of the red to a few hundred dollars. He then had me sign a document giving the bank permission to pursue this on their own.

    They informed Paypal that despite their policy the United States government had it’s own policy as to how long funds could be held and unless they returned the money within five business days the matter would be escalated. My money was returned within 2 days.

  40. crabbyman6 says:

    So if Paypal is suggesting opening one of their money market funds, what do they get out of the deal? I’m not really to inclined to believe that any company, especially Paypal, would suggest such a thing if it didn’t profit them in some way.

  41. Ghede says:

    We must end paypal, to free the money-bunny!

  42. stevegoz says:

    @Andrew: The better to send you a 1098 and report your dividends to the IRS, of course.

    This thread has bummed me out so much that I just withdrew all but a buck from my PP money market account. Might as well put it somewhere where it will be FDIC insured….

  43. shadow735 says:

    I just increase the price of my items under $25 by $1-$2, I only have 5 items the rest are over the $25 mark but still it sucks paypal and Ebay are taking about 10% from my sales. and that doesnt even include my store fee. All in all I break even in cost to sales that will change as I am building stock up and new items. Still I am probably going to go to Etsy, plus set my own online store up on my web site.
    After all I will be vending my wars at a Pirates Ren-faire in Sept so I will be getting a credit card swiping machine so I can get rid of paypal and ebay eventually I am getting sick with how greedy they have become.

  44. dorkins says:

    I was trying to buy a kidney when PayPal froze my account … I almost died!

  45. Sure I could agree with you, but then we'd BOTH be wrong. says:

    In the OP:

    “It’s like a bad dream, really,” said Dana White, an eBay seller who lives outside Ocean City, Md., and deals in used clothing, shoes and accessories. “I’m a small seller. All I need is two negatives in a 30-day period, and they will hold funds.”

    Two negatives in a month? That’s 24 negatives a year… I wouldn’t buy from a seller with that many negatives, no matter HOW much “protection” they had by holding funds. That’s a HORRIBLE record. I’ve been a seller on ebay for six years now, and I have ZERO negatves.

  46. Mr. Gunn says:

    The story here is that Paypal isn’t a bank, isn’t regulated like one, and can do whatever the hell it wants with any money you’re foolish enough to put under their control.

  47. consumerd says:

    LMAO!! :D

    On a more serious note:

    Another site that has been on tv a few times but not near as much and they even help you set up a google pay account is [www.overstock.com]

    So far when I signed up a few months ago they seem to be a little less restrictive than ebay was. I didn’t see anything on the surface that seemed bad. Anyway it’s just a suggestion and just by viewing the auctions the counters are live to. No page refreshes like ebay.

  48. SecureLocation says:

    They also take forever to clear payments made with a credit card through PayPal. They could pass the money on immediately–after all they don’t make you wait 7 days to take an item you bought with a card home from the store–but they make money on the float.

  49. howie_in_az says:

    @ivanthemute: Do you have stairs in your house?

    PayPal is full of horror stories. My ex-girlfriend once sold a bunch of items on eBay, and PayPal debited the account for $14.50, or something thereabouts. Unfortunately, she had already cleared out that account. The bank decided to let the charge go through and tack on an extra NSF fee. For whatever reason, PayPal opted to reverse the charge and try again. Three times. Each time the bank would tack on another NSF fee until they finally closed the account. I’m not quite sure wtf PayPal was thinking.

  50. shadow735 says:

    @howie_in_az: Paypal doesnt think, its a computer that uses a random number generating program that rolls a series of 20 sided dice to determine the chances of errors to insert. Once this computation is completed it withdraws a percentage of the profit and times that by 20% to determine the chance value of bank errors to be preformed. After this is completed is determines that this % is multiplied by 1.546 that random withdrawals will occur and be held on the account for a period of 3 weeks so that the appropriate interest can be collected.

  51. PayPal says:

    The number one priority of eBay and PayPal’s Safer Payments initiative is to make eBay a better place to buy and sell – a responsibility we at PayPal take very seriously. While there has been much discussion around the merits of the 21-day hold policy, it is important to recognize that many banks, merchant accounts and online marketplaces like Amazon have similar rules.

    This blog post suggests that the eBay/PayPal policy will affect a large number of sellers, when in fact it won’t. I would also like to clarify why a seller might experience a hold.

    Only a very small percentage of transactions will be held. Further, most funds that do get placed on hold are likely to be released much earlier than 21 days — by confirmation of the item’s delivery to the buyer -or- by the seller’s receipt of positive feedback from the transaction.

    Established eBay sellers with a good track record should not be concerned. PayPal will not hold payments for eBay items if sellers:

    — Have been an eBay member for more than 6 months, and

    — Have a total Feedback score greater than 100, and

    — Have a buyer satisfaction percentage of 95% or better.

    This initiative is designed to improve the customer experience on the eBay marketplace. We think that it gives buyers increased confidence that their purchases will go more smoothly and that they will continue to return to eBay – which will ultimately grow sellers’ businesses and keep the eBay community strong.

    For additional information, we encourage all sellers to look at the conditions for when PayPal will hold funds: [pages.ebay.com] as well as our blog post addressing the changes: [www.thepaypalblog.com]

    -Michael Oldenburg
    PayPal Corporate Communications

  52. BPorche says:

    Nice to have someone from PayPal to clarify things, it brings in the human touch.

  53. jclpdx says:

    My worst PayPal experience happened today. PayPal put on hold a payment that I received from an eBay sale 10 days ago. I have shipped the item to the buyer’s confirmed address (via UPS through PayPal), the buyer has received it and left me a positive feedback.

    Now eBay sent me this email telling me that they need to conduct an investigation on this transaction, without telling me why. The email says do not reply to it (cause no one will read it?), instead log on to your PayPal account and provide information to help the investigation. The funny thing is, there is no way for me to respond to this “investigation” within my Paypal account. I simply couldn’t find a way to respond to it, not to mention that I wasn’t given the reason in the first place.

    So I had to call PayPal…the first 2 CSRs could not tell me what this investigation is about and what additional information I am supposed to provide PayPal with. So I was transfered to a supervisor, who finally said there was a problem with the payment.

    At this point, I asked why I am even involved in the “investigation” when the information PayPal need from me (when and where the item was shipped to, and whether the buyer received it..etc) is already in my account. After all, I have followed the requirements for the seller’s protection policies. The supervisor admitted that it’s not my problem and I will get the fund released back to me. I asked if they could release the money immediately since everything is cleared on my part, she said I would still need to wait until they “finished the investigation”. In a word, “we know it’s not your fault, but we still want to hold your money”

    I don’t mind the eBay or PayPal fee increase. Actually, I prefer selling on eBay over Craigslist for the reasons that I’d rather not spending my time answering phone calls and meeting up with strangers. I am lucky the amount is not huge. However, it’s things like this that PayPal do to its honest customers that make them one of the worst companies. Too bad eBay + PayPal is still monopolistic.

    Mr. Oldenburg, I hope your company will fix your problematic business practices. By the way, I met all the seller qualifications you mentioned above.

  54. fishing-ace says:

    The number one priority of eBay and PayPal’s Safer Payments initiative is to generate additional revenue and screw customers as you see fit.

    Michael Oldenburg, the company you’re a slave to is full of crap, and you have been maliciously screwing good people for years on end.

    100 feedbacks is a **heck** of a lot of feedbacks; i bet the vast majority of regular joes out there have less than 100fb + 95% requirements to not have funds held.

  55. Snarkysnake says:


    Funny, “Michael”, when a customer has a service issue,you guys cease to exist,but when some principled discussion about PP starts getting tossed about, you’re johnny on the spot. How about resolving customer issues as fast as you spin bullshit ?

  56. Bill Brasky says:

    @Paypal- Come to think of it, I never got my refund on the “KING OF THE DEATHMATCH” DVD that I never recieved… Think 4 years is long enough?

  57. LionelEHutz says:

    Something tells me that a press hungry State Attorney General is going to go after the eBay/PayPal beast sooner rather than later.

  58. jamar0303 says:

    @homerjay: Not in Japan they didn’t. Sometimes it’s nice to have bank accounts and a friend in foreign countries.