Sunday, 14 Jul 2024

Why Paypal Freezes or Limits Accounts and How to Avoid It

freeze paypal account

A few months ago, I wrote an article comparing Paypal Website Payments Pro and Authorize.Net, two popular credit card processing solutions. To my surprise, the article triggered an overwhelming amount of negative feedback towards Paypal. People complained about frozen accounts and restricted access to their funds. It made me paranoid about my own business, as the inability to process credit cards can be detrimental to any business’s success.

Paypal Horror Stories From People I Know

Most of the horror stories I’ve come across involve Paypal randomly limiting accounts or freezing funds. While some complainants say that Paypal rarely holds funds for longer than 6 months, it can still be a significant inconvenience. Once your account is frozen, accepting money through Paypal becomes pointless. Online forums are filled with such stories, but I always take them with a grain of salt. However, a few of my fellow blogging friends did share their personal experiences of having their Paypal accounts frozen for no apparent reason.

In both cases, their accounts were frozen after a big product launch. One friend had their account limited to processing only $10,000 per day. The other had over $40,000 frozen for 180 days. It seems Paypal doesn’t like seeing sudden spikes in account activity.

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Why Paypal May Limit or Freeze Your Account

Curious about these issues, I decided to contact my dedicated Paypal account manager for clarification. According to them, it is extremely rare for Paypal to place holds on user accounts. However, there are certain triggers that may lead to account limitations or freezes. These triggers include:

  • Receiving an unusually large amount of money in your account
  • Receiving complaints about your business
  • Experiencing a series of chargebacks
  • Having questionable content on your website
  • Violating Paypal’s terms of use (e.g., selling illegal items)
  • Outdated or incomplete account information
  • Suspicious login activity
  • Being a higher risk customer based on credit score or background history
  • Detection of fraudulent activity on your account

Preventing Paypal From Limiting Your Account

During my conversation with Paypal, they assured me that only a very small fraction of users experience account freezes, and that such freezes rarely last the full 180 days. They also provided some guidelines to reduce the chances of account limitations:

  • If you anticipate receiving a large sum of money, inform Paypal in advance.
  • Complete the survey during the Paypal Website Payments Pro signup process and indicate higher monthly earnings.
  • Contact Paypal to ensure there are no limits on the amount of money you can accept per day.
  • Ensure that the name on your Paypal account matches your bank account and credit cards.
  • Use the same addresses and phone numbers that match your bank account and credit cards.
  • If you ship physical goods, use trackable shipping methods to resolve disputes.
  • Ensure that your FEIN or social security number matches your business name on the account.
  • Link both a credit card and bank account to your Paypal account.
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Is It Worth the Trouble?

Ultimately, the decision to use Paypal depends on your specific circumstances. If you sell informational or digital goods and experience irregular revenue, consider using a regular merchant account and gateway like eMerchant. The same applies if you have low credit scores or a history of fraudulent or criminal activity. If you want to minimize the risk of account limitations or freezes altogether, opt for a regular merchant account and gateway.

My wife and I use Paypal because it offers a convenient way to handle shipping and accept payments through one interface. While Paypal’s fees are higher than those of traditional merchant accounts, the perks make it worthwhile for our store. If you choose to use Paypal, it’s a good idea to contact them to ensure there are no artificial limits on your account.

Related Posts in Payment Processing

  • The Cheapest Credit Card Processing Option for Small Business – Stripe vs Paypal vs Authorize.Net
  • Stripe vs PayPal – The Best Payment Processor for Your Business
  • How to Fight, Win, and Prevent a Credit Card Chargeback
  • How Credit Card Processing Companies Deceive You with Low Rates
  • Why Paypal Freezes or Limits Accounts and How to Prevent This From Happening to You

Steve Chou is a highly recognized influencer in the ecommerce space and has taught thousands of students how to effectively sell physical products online through his website He has been featured in Forbes, Inc, The New York Times, Entrepreneur, and MSNBC. Steve’s expertise extends to podcasting, where he hosts the top 25 marketing show on Apple Podcasts, “My Wife Quit Her Job.” He also runs a successful ecommerce store called and organizes an annual ecommerce conference called The Sellers Summit. With a background in electrical engineering and entrepreneurship, Steve brings a unique perspective to the ecommerce industry.

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