Don't get caught with insufficient funds in Paypal

Paypal is a very widely used payment method on the net. Ebay uses it. Other online merchants use it to sell their products. I've used it many times (all for small amounts) and it seems quite secure. However there are a few things to notice with using Paypal. I'll talk about Paypal's "Funding Options".



When you send money to someone using Paypal, the default payment method may be from your debit account. As you can see in the screenshot above "Instant Bank Transfer" from my savings account is the default option, and Paypal states that "Paypal will use Visa xxx xxx to fund this transaction if your bank does not have enough funds."

Well it sounds very easy and simple. Paypal doesn't charge you if it has to use "Backup Source" because you don't have enough funds in your primary source. But the catch is your bank will!!! If you don't have enough funds in your debit account, once Paypal tries to withdraw funds from it, the bank will charge you "dishonor fee", which normally is around $30.

So here are a few tips for how to avoid dishonor fee from your bank while using Paypal

• Make sure the funding source you select has enough funds


• DO NOT ever rely on Paypal's automatic backup source option. Your bank may end up charging you hefty fees


• If you accidentally paid and you realize it doesn't have enough funds, transfer money to that account as soon as possible. Go and deposit it personally. Sometimes Paypal doesn't charge straight away. I got away like that once.


• If you don't have enough funds in default funding source, click "change" and choose another source with enough funds

Once again, Don't rely on Paypal's automatic backup source option.