PayPal has a huge number of systems in place to ensure you get paid and reduce fraud. Remember that eBay owns PayPal and it's in eBay's best interest to keep fraud off its site and out of the PayPal payment system.

   We've sold thousands of items on eBay. In our eBay history, only 2 auctions turned out to be to fraudulent PayPal payments. PayPal did immediately remove those funds from our PayPal account once PayPal realized the payments were invalid. Yes, we had already shipped the items to the buyer too.

   This might sound ominous at first but you must remember two things:

1. The funds were fraudulent and just like you accepting counterfeit money, a fraudulent PayPal payment was not legal money put into your account. The fact that you are innocent makes you a victim but still you cannot expect to keep the money.
2. PayPal provides a simple way for you to get that money put right back into your account - for many eBay transactions.

Getting the Money Back - Sometimes

   PayPal's rules state that if you sell to a PayPal buyer who has a confirmed mailing address, and you ship to that confirmed mailing address, then you as the seller will be protected. You must have proof that you mailed the item to that address and postal delivery confirmation is a great way to do so inexpensively.

   Having a confirmed PayPal mailing address is not the same as being verified by PayPal and sellers are only protected if they sell and ship to buyers with confirmed PayPal mailing addresses.

   Therefore, many sellers limit their sales to PayPal buyers who have confirmed mailing addresses. This is fine, PayPal doesn't mind.

   You might be limiting your sales though. As you grow your eBay business, you should continuously monitor how much risk you can comfortably handle. By accepting all PayPal payments, even from buyers without confirmed mailing addresses, you open your buying audience up to far greater numbers. More people will compete for your items. You increase your exposure to fraud but you increase your income too.

Getting Confirmed

   To get a confirmed PayPal mailing address, buyers must register a valid credit card with PayPal. Not everyone wants to do that so many valid and honorable buyers exist who will never have a confirmed mailing address on their PayPal account. You don't want to refuse their money!

   Of course, the problem is, how do you know who is fradulent and who isn't? Fortunately, the numbers are in your favor. The vast majority of PayPal users are honorable.

There's a Way to Do Both

   Some sellers find a good middle ground when they accept PayPal payments.

   We often do the following: when we sell a high-dollar item, or one that has the potential to sell for a lot of money (over $100 for sure, and for most things we sell we don't impose the confirmed mailing address-only rule until we sell an even far higher-valued item), we request that if the buyer pays with PayPal, the buyer must have a confirmed mailing address. That way, we protect the high-end item but for most things we sell we'll sell to all PayPal buyers - those with and those without confirmed mailing addresses.

International Selling is Still Problematic

   PayPal only allows a few countries outside the United States to confirm mailing addresses at this time. Fortunately, the number of countries allowed to be confirmed is growing but not as quickly as we'd all like. In addition, mailing internationally doesn't always offer you a simple way to get proof of delivery to that address.

   Given that international buyers outside the USA now account for about half of all eBay sales (and is rapidly growing), you're really missing out on higher bids if you're a US seller who doesn't sell outside the states. You are limiting your income in a manner similar to businesses that don't take credit cards. Sure, such businesses' expenses are higher if they take the cards but their income is far more too. In the same way, if the risk of fradulent buyers worry you enough to sell only within your country, you are limiting your potential market in a huge way.

   It's easy to say - and it's true - that fraud is just a cost of doing business. For some sellers, however, one ot two bad sales can sure be costly if the buyer turns out to be less than scrupulous.

Our Story Continues

   The two fradulent buyers we had were both inside the USA. We've never had a payment problem outside the USA and we sell around the world. Do we worry about fraud? No. Will it happen to us again? Probably. Will we be upset? For a very short time and then we'll continue moving forward with our eBay business.

   Given that PayPal protects the seller if the confirmed mailing address rule was followed, it turns out to be our good fortune that both of those fradulent buyers did have confirmed PayPal mailing addresses. Once we sent PayPal the delivery confirmation showing we mailed the item to the PayPal-supplied confirmed mailing address on record, PayPal immediately put the funds back into our PayPal account and PayPal took the loss.

It's All Risk and Reward

   As a syndicated newspaper columnist about eBay, as well as a trainer on using Direct Marketing techniques to boost eBay sales, I run into lots of eBayers who want to know how to protect their sales from fraud. In general, limiting your sales to buyers who pay with checks and money orders only is unwise because too many buyers prefer PayPal. Those buyers will go to your competitor and buy the same item.

  Likewise, if you sell only to buyers with a confirmed PayPal mailing address, you limit your sales as well because many PayPal users have no confirmed mailing address and are honorable. This applies to International buyers, many of whom live in countries that PayPal doesn't yet allow confirmation of mailing addresses yet.

   Giving your credit card to an unknown waiter in a restaurant is far less secure than using PayPal. If you are hesitant to accept PayPal, you should reconsider. If your first PayPal transaction turns out badly, you will regret the decision but it's all just a 'numbers game' as they say. Over time you will be thrilled that you began accepting PayPal.