Originally Posted by ssdnodes-matt
Unfortunately PayPal doesn't cover anything that's intangible, which includes hosting. The above snippet was from a recent claim I had for a fraudulent vendor who didn't deliver their dedicated servers that we paid for. Good thing I paid through PayPal using a credit card, which allowed me to file a chargeback against them anyway.
I'm not discounting PayPal at all, but there are plenty of fraudulent providers who rely on the fact that PayPal doesn't protect you for intangible items, which includes hosting.
I agree with you that PayPal is great with fees, especially since you don't have to worry about qualified vs non-qualified purchases, business card fees, etc. PayPal fees also dramatically decrease when you are processing more than $10,000 monthly. Most merchant accounts have their own monthly fees as well. I wasn't necessarily bonking PayPal as a legitimate provider, but I personally look to see if a provider has more than one payment method.
Regardless of whether they will guarantee any transaction that is irrelevant. You have to follow up just like any business that is dealing with a fraudulent vendor. Doesn't matter if it is PayPal or any other situation. All a chargeback means is that the business will have to show you really owe them by producing a sales receipt and a reason for cancellation and at that point if they can prove they issued you whatever it is you bought then they give them the money back and you have to fight it out in court.
The protection for the customer is that the business doesn't actually ever get your credit card number so they can't just up and make charges anytime they want and you only find out when the bill comes.
With PayPal the user has to approve and agree to pay each transaction unless it is a subscription that goes through automatically which then the customer would know about at as well.
This is also a bad thing as well for the host since you would have to submit a bill for overages and hope they pay it. If you have the credit card on file with your company then you can just up and run the charges they owe you for that they agreed to pay in the TOS signup process.
The protection for the host is that you don't have their credit card number so you don't ever have to worry about a security breach that leaves their person data open for the world to see and have to be responsible for that.
The state of South Carolina had a security breach on their servers and network and cost them an estimated $12 million dollars to handle for 3.6 million affected users. Note these are taxpayers that were affected.
Just the bill alone for researching how they got in and what was affected and securing the servers was a whopping $125K.
WHMCS not long ago suffered as well with many of their customers data ending up on the internet over a security breach that was done by a social engineering attack as well.
I don't recall ever hearing of a PayPal security breach that ended up leaking customers credit cards and banking information. It might have happened, but I missed it.
The point is that PayPal not you are paying for the security personnel to secure the transaction servers and data storage security.
This doesn't actually stop the host from having to be thoughtful about securing the servers and security issues, but it is one more stumbling block to help protect everyone in case of a problem that everyone missed.
As for trying to be weary of trouble then only choose PayPal verified business owners and such.
I will say also that PayPal has multiple ways to check out one such method is the standard check out. They also have a gateway like a regular merchant account that you can get and use as well.
Heck I even have PayPal Here for use if need be.
The facts are that PayPal does have a verification process where you have to prove you own any bank accounts you add to extract money or add funds to PayPal so there is a definite link to an individual or company at the end of the road with PayPal.
As for credit verification PayPal does that as well they don't just give out all their services to anyone that is verified without a check as implied.
You can of course register with a credit agency and run a check on anyone and everyone you do business with. I don't know of any host that does that however. I know I sure wouldn't give anyone my Social Security number either nor would I recommend it to anyone as well to start doing that. That is why I have an FEIN.
As for regular merchant accounts I have a story to share. I did have an Authorize.net account when I first started. In my research that was listed as one of the needed things to run a business and I didn't know better so I got setup with Authorize.net with a virtual terminal.
This was all fine and worked, yet it was quite costly for a business starting up. Here I was having to pay for this terminal access and gateway fee while at the same time trying to pay for other business expenses. I ended up ditching it for PayPal which was a pay per use option and fit quite nicely.
Later I decided to try getting an Authorize.net merchant account again. This seemed okay for a while then next thing I know I get slapped with a $99 bill and the money was taken out of my account without my authorization.
I called the company up and they told me they were sorry that this was supposed to be covered and not taken out. I canceled my account at that time with the person that set it up and told them I would give them X days to get the money back in my account or I was going straight to the FBI for financial fraud.
I got my money back needless to say, but you can't trust everyone that represents themselves as an authorized Authorize.net merchant account representative to get an account with Authorize.net
I hope this makes my comments more clear.
I will say that there was a time when I first began that I had the same ideas about someone using PayPal I thought of it as just a method of payment for auctions and small stuff. It was later after really learning how PayPal operates and getting to know the system that I saw different.
The real trouble you have with PayPal is that it is not a bank and doesn't have to follow the same rules and such. Your money is not secured in case of something happening like a FDIC secured institution like a bank.