Something I’ve found difficult to locate online is information regarding Paypal, billing and subscriptions. They do have a pretty extensive help center and developer center…but it’s the little details such as information regarding ECHECKS!
Assuming you are a seller using paypal’s “Payments standard”.
Your product is a service such as hosting - clients pay via a monthly subscription/recurring payments.
Did you know…
When a buyer starts up a new subscription it needs to be paid via
1. A credit card or
2. An account with a credit card attached or
3. Via an echeck or instant bank transfer.
It does not take payments from an existing balance in paypal. Even if the buyer has $1000 dollars in his/her paypal balance, it’s untouchable. This was interesting to me. Theoretically it only applies with the FIRST payment. Once the subscription starts off, as a buyer you can then choose to pay from your paypal balance directly.
Another interesting thing about echecks while on a subscription/recurring payments:
Say as a buyer, you’re paying for hosting/or other webservice, and you’ve paid with paypal on March 1st and started up a subscription. April 1st rolls around and you don’t have enough funds in your account, paypal initiates an echeck (after trying out your credit card) which is drawing cash directly from your attached bank. Echecks regularly take 4-12 business days to clear.
Apparently, and I say this with vague memory of what I’ve discovered a couple months ago, apparently as you pay with an echeck, even though your funds haven’t cleared, your subscription stays on the same billing course, which is roughly every 30 days or 1st of each month. If your funds take 2 weeks to clear (which is maximum) and your service has shut down within the pending stages, you’ll notice your webservice will kick in once the echeck clears (March 12th) and you get a lovely 18 days of use until your bank gets charged once again, and your web service shuts off until your echeck clears again…and the cycle continues till you’ve wondered why the web service you’re paying top dollar to seems insanely intermittent.
Moral of the story:
As an online buyer on a recurring plan: Keep your paypal balance padded, or an active credit card attached. Keep an eye on your subscriptions and prepare to change the source of payment (instant bank balance, paypal balance, creditcard, or echeck)
Realize that echecks can be nasty things that take up to 2 weeks to clear which means your online service can be stopped while it’s pending.
As a seller: Keep an eye on users who buy with echecks on recurring payments. If you’ve setup your product to activate upon payment, it may activate the service/product before the echeck clears or possibly bounces. Although one thing to note: The bank with the bounced echeck may charge the buyer with an overage fee on their end which can protect this from happening often.
Happy online buying and selling with paypal!
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