PayPal has been a convenient way to transfer money online since 1998, and it only continues to grow. The company’s revenue jumped from $3.5 billion in 2010 to more than $25.8 billion in 2021. That makes PayPal a leading digital payment processor worldwide. But with all that popularity, you're bound to see some scams.
Scams are all over the Internet, especially where digital transactions are processed. PayPal is one of those places, and while they take active measures to protect their users, it's still important to be aware of scams you might encounter.
1. Advanced Fee Scams on PayPal
The advanced fee scam is a popular scam that involves someone pretending to be selling something. It might be a product or service on almost any platform like eBay. The catch is that the seller might try to get you to pay them in part or whole before shipping the item.
Often, the payment platform chosen for scams like this happens to be PayPal. Once you send the advanced fee, the seller will simply disappear with your money.
Scammers like to use PayPal since it’s a reputable platform that people tend to trust. The problem is that there are far more compromised PayPal accounts than online banking accounts. Cybercriminals actively sell hacked PayPal accounts for pennies on the dollar.
Signs of an Advanced Fee Scam
- Item prices that seem too good to be true.
- Often uses PayPal as a payment medium.
- Requests for payments before items are shipped.
What to do if you spot an Advanced Fee Scam
If you think someone may be trying to trick you into sending them money by pretending to be selling something and asking for a fee before the sale is complete, report the seller and don't send any payments.
2. Shipping Address Scam
The shipping address scam is something that affects online sellers. Scammers have tailored it to “fool” PayPal into giving them a refund. The process involves some work on their end but if things work out, they get the item you ship and their money back from PayPal.
How the Shipping Address Scam Works
- The buyer provides a fake or invalid address.
- The shipping company contacts the buyer since they can’t deliver.
- The buyer then provides an accurate shipping address.
- Meanwhile, the buyer claims a refund from PayPal due to a non-received item.
This scam works due to a PayPal policy loophole in their seller protection. It only covers the original shipping address in their system. Since the buyer changed the shipping address with the shipping company, you lose your money.
How to Avoid Shipping Address Scams
If you are purchasing an item online and accepting an offer from a stranger, be sure that the address on your shipping label matches the one you entered when placing your order. It's also important not to accept offers from sellers who request addresses other than what appears on your package.
Always keep an eye open for communications from your shipping company. Some may include silent notifications on minor amendments to shipping orders.
3. PayPal Overpayment Scams
The Overpayment Scam is a trick in which a buyer pays more than the agreed price for a product or service. For example, you sell a $10 item, and the buyer sends you $20. Once that happens, the buyer will ask you to return the difference of $10 to them via another account.
How the Overpayment Scam Works
- The initial transfer of money to you happens.
- Once you refund the extra, the scammer tells PayPal the original transaction was a mistake (ironically, that the account got hacked).
- PayPal refunds their money, and you lose out on both ends.
How to Avoid Overpayment Scams
The overpayment scam is generally easy to avoid since it has a glaring flaw. It requires that sellers not use the PayPal checkout system. When using the checkout system, overpayments can't happen.
If you insist on accepting direct payments, do not process partial paybacks. Instead, insist on order cancellations and entire refunds being made only to originating accounts. Buyers can then repeat the purchase and pay the right price.
4. Phishing Emails Using PayPal
Phishing is a scam where someone tries to trick you into giving out your personal information. Scammers can attempt this via various methods, but the most common is via email. Fake PayPal emails are common because consumers are often familiar with the brand, and there is a perception of trust.
How the PayPal Phishing Email Scam Works
- You get an email claiming to be from PayPal.
- Email content tries to get you to click a link.
- The click redirects you to a fake PayPal website.
- The website captures any information provided, such as login name and password.
- Hackers can then use the information to access your PayPal account.
How to Avoid Phishing PayPal Scams
This type of scam can be challenging to spot because phishing websites today are increasingly well-designed. Unless you look for specific things, it can be difficult to tell fake from original websites. Where possible, avoid clicking links in email and open the PayPal website directly on your web browser.
Always check the URL in your browser address bar if forced to use a clink to ensure you’re at the right place. Keep a sharp eye out for minor mistakes. For example, instead of www.paypal.com, a scammer might use www.pyapal.com.
5. Fake Charities Scam on PayPal
If you're thinking of donating to a charity, it's essential to know how to spot fake charities. PayPal is one of the most popular payment methods for online donations because it offers convenience and security. However, certain risks are associated with giving money over the internet.
PayPal charity scams often happen elsewhere and simply use PayPal as a medium of funds transfer. PayPal makes it easy for anyone to accept donations via their account through a “Donate” button.
How PayPal Charity Scams Work
- Scammers approach potential victims via various means, including email, SMS, instant message, etc.
- They make a charity pitch (or sometimes an investment pitch).
- Victims make donations via PayPal, often to a hacked account.
- Scammers withdraw the funds, then disappear.
How to Avoid Charity Scams
Always be sure that the charity you’re donating to is legitimate. Most countries maintain a public list of recognized charitable organizations. Check the list and donate via officially approved channels on the charity’s website.
6. Hacked Accounts
Although not a direct scam, hacked accounts are common on PayPal. If a hacker gains access to your PayPal account, they can use it to commit fraud. They might be able to make unauthorized withdrawals from your bank account and transfer them into their accounts.
They might also be able to use your funds on eBay or other websites. If you see an unauthorized purchase on your statement, contact the seller immediately and demand a refund; otherwise, they may not be held responsible for losing funds through fraudulent activity.
Even worse, hackers may use your account as a “money mule” to help them channel funds they scam from other users.
How to Avoid PayPal Scams
Staying safe on PayPal is often similar to staying safe anywhere else in cyberspace. That means staying alert and ensuring you follow prudent security measures in everything you do online. Here are some things you can do to avoid PayPal scams:
Keep Your Account Secure
Don't share your password, and don't give it out to anyone unless you are sure they are who they say they are. If someone claims to be someone else (like a PayPal employee or a family member) and asks for your password, do not give it to them!
Don’t Send Advance Payments
Unless buying from a legitimate eCommerce website, never send money in advance to personal sellers before receiving an item. Check the address and phone number of the seller as well as their rating on eBay or elsewhere online before sending payment. If something sounds too good to be true, it probably is!
Be Cautious of Email Links
Email links are always dangerous since you often don’t notice where they direct you. Many assume it’s to the official PayPal website, for example. Where possible, enter the website address into your browser manually.
How to Deal with PayPal Scams
PayPal has a few ways you can report fraud and scams. The first step is always to open a dispute on a scam transaction and work with PayPal to resolve it via their Resolution Center. Aside from that, there are other more proactive tools available.
For example, you can report potential phishing emails to them by sending them a copy of the email to [email protected], and they will do the rest of the work.
Contact PayPal Immediately
If you feel that you’re a victim of a PayPal scam, you need to contact PayPal immediately.
You should alert them of the problem as soon as possible, and they'll help pull up your transaction history and work with you to investigate further.
You can also file a complaint with the Federal Trade Commission (FTC). The FTC has a Consumer Sentinel Network that allows consumers to report fraud or other types of illegal activity to help prevent it from happening again in future cases.
In some cases, a police report may also be necessary.
PayPal scams are prevalent and target both buyers and sellers. Sadly, most funds lost through these scams are purely due to negligence. Be attentive to what you do online, especially where money or personal information is concerned.