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PayPal Float Concept

By Dan


I have worked with paypal via Ebay for a few years now. I learned something very early, which has made me cautious about using them, especially after Ebay bought them.  It is the concept of “float.”

Float is basically squeezing an interest-free loan from someone by dragging one’s heels in passing along a payment, cashing a check, etc.  It’s tantamount to check “kiting” in its worst instances, where one essentially creates money out of nothing by escalating the amounts of floated checks.

This is almost what PayPal is doing.

My experience with them has been, that even at their best, they “sit” on our money for 3-5 days, interest-free, before  assing it along to the seller of an item.  At worst, they frequently experience “computer crashes,” which in one case, froze my $500 refund money between the seller and me… it was in neither of our accounts.  I verified this with a phone conversation – once I got through!  I was on hold one time for 45 min’s (I have a very cheap phone card, but it still cost me about $2.00 just for waiting.)

Many of the stories I’ve read on your site also involve PayPal “Bogarting” the money in question. Even if they eventually return that one guys $3k, think of the interest they make if they just take all that money and put it into a revolving money market account.  They’d have an average of easily $2-3 million in it, which over a year at 2% is $40-$50,000, without paying us for their “loan!”

Now add to that the money for special deals like that $3k, and you can add a few million to that account. Of course, PayPal probably has more creative things they can do with $3 million, like lending it through a mortgage broker, Money Tree ™ or more likely, buying commercial paper (high-risk short-term loans to businesses).

So, whether or not they are crooks, they are learning from the biggest crooks of all, the US Government, who gets interest-free loans from all us working stiffs through “payroll withholding.”  We HAVE to deal with the gov’t, or they send their IRS thugs after us.  But, we DON’T have to deal with PayPal, right?

Do they have any competition? Using a competitor would be the best revenge, and also maybe clean up their act w/o trying to rely on prosecutors, courts, etc.  We’ve seen what those folks do to the Enrons and Michael Millikens’ of the world… virtually nothing! Certainly reimbursing the victims is not on their “to-do” list!

Now that you’ve been cheered up… go forth and be happy!

Posted: May 7, 2012 at 8:06 am

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2 thoughts on “PayPal Float Concept
  1. Brian Watson on

    I purchased an item on an Ebay auction on Sunday afternoon, paid via Paypal with seasoned bank funds a few hours later. Seller cancelled sale unilaterally, claiming item was destroyed. I have irrefutable proof that he was lying. Anyway, he refunded my money through Paypal, money that had never been able to leave his Paypal account because Paypal holds it there for 3-4 days. It was hours, not days. Paypal places hold on my being able to effect transfer of funds back into my bank account for 3 days before allowing me to “re-transfer”. Once I took the steps to get the funds back to my bank, I was informed that they could be held for another 3-4 days, supposedly depending on my bank, before I would have them cleared. These funds never left Paypal control. They were seasoned when they got them from me, should have been seasoned when they came back to me, via Payal, hours later. They are getting away with the world’s largest virtual check-kiting scheme. I have filed a complaint with the FTC about it. I may file something with banking regulators as well. The things that Ebay/Paypal get away with are incredible.

  2. Wm Reinus on

    What about a class action lawsuit?