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Why eBay Dropshippers Get Trapped in the PayPal Jail

The PayPal Jail is where many eBay drop shippers find themselves in the early stages of running their business. If you’re a new seller on eBay, you’re likely to experience having your PayPal payment frozen after making your first sale. When you haven’t read all of Ebay’s policies as well as PayPal’s before starting your dropshipping business, you might end up panicking over the hold funds. The truth is, it can become a recurring nightmare if you don’t know the answers to the following questions:

  • Why did you get trapped in the PayPal Jail?
  • What should you do to avoid it?
  • How to escape from PayPal Jail?

Even seasoned drop shippers/sellers can still found themselves in PayPal Jail if they don’t meet the minimum standards in their performance evaluation that eBay conducts regularly.

In this article I will discuss the answers to the above questions which include the reasons you can end up in the PayPal Jail; things you can do to avoid getting your payments frozen; and if it’s already on hold, the measures you can do to escape from there.

First and foremost, let me define PayPal Jail. PayPal Jail is the term used when the payments made by the customer to the drop shipper/seller is put on hold by PayPal for a certain period as instructed by eBay. When this happens, you cannot withdraw the frozen funds for as long as 21 days from the date of the transaction.

Reasons You Can End Up in the PayPal Jail

If you’re not aware of the eBay policies about putting payments on hold, you might think that the problem lies with PayPal. The truth is, PayPal only freezes or unfreezes payments after considering the information that eBay provided. If eBay puts your money on hold for a specific reason, they will advise PayPal who in turn will freeze the payments for a maximum period of 21 days. During this period, PayPal will not release your money to allow eBay to assess your situation and whether that payment is a possible risk or not.

Photo by Sharon McCutcheon on Unsplash

eBay hold payments as a way to ensure the safety of its sellers and buyers in its marketplace. They must make sure that you’re not a scam artist but a genuine drop shipper/seller who sells real products and not just there to rip off people of their money. eBay can freeze your payments in any of these instances:

  1. You’re a new eBay drop shipper and hasn’t established a transaction history yet.
  2. The payment for a transaction is way above your usual sales when compared to your previous sales.
  3. Your total sales are below the minimum standard that eBay imposes to all eBay sellers, dropshipping or not.

Things You Can Do to Avoid Getting Your Payments Frozen

As an eBay drop shipper, you must follow the policies set by the marketplace. Any violations to their rules are dealt with penalties which can be temporary or permanent depending on the severity. Two important policies you have to know and adhere to are the Seller Performance Policy and the Selling Practices Policy.

Seller Performance Policy

In the Seller Performance Policy page you can find the following:

  1. An overview of the policy about the implementation of minimum performance standards in certain areas that a seller can control which includes shipping time and responding to the customer’s query. eBay plan for sellers to give consistent service to achieve a high level of customer satisfaction.
  2. The timeline of the performance evaluation period which can be done per month or every 3 months depending on your latest transactions.
  3. The indicators that may affect the performance evaluation such as the rates of a cancellation initiated by the seller and the unresolved cases filed and closed under eBay Money Back Guarantee and PayPal Purchase Protection.
  4. The list of consequences if you will not be able to meet the minimum standard which can be any of these:

– Limitation on your selling activity

– Restriction from selling your products on eBay

– Downgrading of your plan to the Basic level

Selling Practices Policy

To provide a great experience to customers, eBay came up with a list of guidelines that you should follow when you sell dropshipping products in their platform. These include shipping service, shipping and handling costs, shipping and handling time, terms and conditions, and more.

By reading and understanding eBay’s policies and guidelines, you’ll be able to follow all the rules and avoid consequences like getting trapped in the PayPal Jail and put on probation for 90 days.

Measures You Can Do to Escape PayPal Jail

If you do find yourself penalized by freezing your PayPal payments during the probation period, the next thing to do is to call eBay to know why your funds are on hold. However, if you are one of those who can’t manage to talk with human customer support, there are still ways that you can do to fix the problem and have your money released sooner by PayPal.

Any of these three measures can help you get out of PayPal Jail:

  1. Undergo a 90-days probationary period. During this time, all your transactions will be under scrutiny by eBay. Any transactions that eBay deem suspicious, the payment will be put on hold for a maximum of 21 days.
  2. Earn sales of at least $250 within the 90-days probation.
  3. Process a minimum of 25 transactions within the 90-days probation.

If you manage to achieve numbers 1 or 2, your probationary period will end immediately. Any payments you received after the lifting of your probationary status will be credited directly to your PayPal account.

About the 21-days fund holdup in PayPal, you can circumvent it in two ways. First, by adding the tracking number to the payment transaction details which shows the item has been delivered.

Photo by freestocks on Unsplash

Second, your customer provides positive feedback which confirms that you are a reliable seller who made your buyer happy. When any of this happens, your PayPal payments will be released within 2–3 days.

In case you have met any of the criteria for fund release but your money is still on hold, you can then call up or email PayPal and inform them of the transaction numbers of the payments that they have to release immediately.

Key Takeaway

Whichever marketplace you decide to start the operation of your dropshipping business, make sure that you have read and understood their policies before you set up your store to avoid violating any rules. Many eBay drop shippers get trapped in the PayPal Jail for breaking rules unknowingly. So if you want to stay away or escape from PayPal Jail sooner and for good, let this article be your guide.

Want to learn more about dropshipping?

Is Spying on Your Dropshipping Competitors’ Ads on Facebook or Instagram Worth Your Time?

How to Negotiate with Dropshipping Suppliers the Right Way

Dropshipping Business: 5 Free Marketing Strategies



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David Linder

David Linder

Founder of winning dropshipping products uploaded daily.