At some point, many eBay sellers find that PayPal places a "hold" on a buyer's item payment. Suddenly you discover you don't have access to your funds, despite a sale going through successfully. Why do eBay and PayPal do this?
In January 2012, eBay changed its policy on holds, to "increase the quality of the auction experience," according to an article in The New York Times. It's not a perfect system, and there are some ways to potentially avoid having your funds held. Before you let frustration completely engulf you, there are some basic things to know about PayPal payment holds.
The Basics About Paypal Payment Holds
Payment holds can happen even to sellers with a perfect feedback and delivery record and an eBay membership that dates back years or even more than a decade. A hold does not mean that eBay is about to suspend you or that you're on a "blacklist" of some kind.
And they're not indefinite. Payment holds last no longer than 21 days, and in some cases they may be shorter than this—holds can be lifted along the way as the status of the item is updated (when it's marked shipped and a tracking number is provided, for example, or when the tracking number reports delivery, or when the buyer leaves feedback for you).
It's not going to affect your seller reputation. The fact that a payment has been held is not related to your buyer. The hold is known only to yourself and to PayPal.
So if it's not about you and it's only temporary, why has it happened? What is PayPal doing?
Common Reasons for Holds
In general, it's not possible to know all of the reasons for a hold, and it's likely that the decision wasn't made entirely by humans. When a hold is placed, eBay and PayPal are basically engaging in a kind of risk management on their end; they want to make sure that funds are readily available in case a refund has to be issued, and want to give the transaction time to play out before the funds are released to you.
Here are some reasons that a hold might be placed:
- It's a Risky Type of Item
Most sellers know that some categories on eBay are particularly subject to fraud and poor seller behavior. Classic examples are areas like hot consumer electronics and phones, tickets and gift certificates, and categories in which fakes and counterfeits are common. Many more holds are placed for items or categories that have been problems on eBay's end than for items or categories that are relatively trouble-free.
- You're Acting Out of Character
eBay tracks how much you sell, what sorts of things you tend to sell, and how your transactions have gone in the past. If as a seller you suddenly begin to sell in ways that are unlike your past activity, such as sales in a new and risky category, PayPal may place a hold for a period of time to ensure that you really are you. Identity theft is a constant problem for online merchants, and PayPal is no exception.
- You're Relatively New to eBay
If your selling history is somewhat limited—just a few items sold so far, for example—and the listing is relatively high in value or in a relatively risky product area, PayPal may have placed the hold as a precaution until they have evidence that the transaction has gone well and (to put it bluntly) they can tell that "you know what you're doing," so to speak.
- You're Spending Differently
If you regularly use your PayPal account to make payments, whether online or with a PayPal debit card, the hold may not be directly related to your selling activity so much as to your payments activity. Red flags might include spending in a different country or larger-than-usual purchases. A hold in these cases has the potential to protect you in the event of fraudulent activity.
- Your Recent History Is Spotty
If despite your best efforts you've recently had some trouble as a seller that has been brought to eBay's attention, PayPal may begin to place holds on transaction funds until it's clear that transactions have been successfully completed.
Even with this knowledge, sometimes a hold can appear unrelated to anything you can think of. Most of the time, sellers would prefer that holds not happen at all. There are a few steps that you can take to prevent them.
How to Reduce Your Risk of a Hold
eBay likes fast, documented shipping. Both eBay and buyers prefer that you ship quickly and that you log this quick shipment on My eBay along with a tracking number. And, as most sellers are well aware, eBay doesn't like to hear from customers much. It generally indicates there's a problem. So try to communicate with buyers as much as you possibly can.
Feedback Matters: Don't Ignore It
Don't adopt the "thick skin" mentality about eBay selling. eBay wants you to care that you have received negative feedback or that your detailed seller ratings are dropping, and holds are one of their most effective methods for getting you to care.
eBay and PayPal want to know that they can reach you at any time, so make sure your contact information is up to date, as well.
Sometimes There's Just a High Risk
No matter how honest you are as a seller, the fact is that in some categories and around some types of items fraud and customer dissatisfaction are serious problems. If you're selling item(s) of these kinds or in these categories, it's best just to realize that eBay and PayPal are going to protect their bottom line (since they have to shell out for buyer protection claims in many cases) and to accept it.
How to Handle a Hold
Many seller's first reaction to their first payment hold is to try to contact eBay or PayPal immediately and give them an earful. Most of the time, this simply doesn't work. eBay and PayPal are famously unwilling to budge in most cases, no matter how well you plead your case or explain the circumstances. It can happen, so it's worth a shot, but make sure you have documentation and your case is a really egregious example of a hold that's been misapplied.
Bear in mind that extended holds or very large holds that endanger a sizable business can carry you into legal action territory—but if that's really where you are, your contact shouldn't be with the eBay or PayPal customer service departments, it should be with an attorney.
So, the short answer is that in most cases, a payment hold is a necessary periodic evil involved in eBay selling. If it becomes a regular occurrence and is affecting your ability to continue to do business on eBay, it may be time to think about some eBay alternatives as an online seller.