How to avoid PayPal scams

Paypal scams

When it comes to online payments, Paypal is pretty much omnipresent these days.

Whether you are signing up for a VPN or another online service or buying items on eBay or other e-commerce sites, Paypal remains one of the most popular services for users all over the world.

In the UK, PayPal was the most used online payment method in 2019, with 49% of shoppers using Paypal compared to 37% with a debit or credit card.

But this universal popularity has also drawn the attention of fraudsters and scammers.

This means that Paypal users have to be alert at all times to ensure that you aren't scammed out of payment funds. But, in all honesty, how careful are you when using Paypal?

There are numerous PayPal scams out there, and cases of fraud happen all the time, some targeting buyers' or sellers' actual PayPal accounts.

From fake charities to fake site usage, alleged problems with your account, fake transaction detail shows, and more. Some may even try to impersonate your friends and family or use someone else's PayPal account to trick you.

Some scams out there even involve stolen credit cards or debit cards, but in this guide, we will highlight some of the most common scams you are likely to encounter.

So if you want to increase your safety on Paypal, keep reading.

Top 7 Paypal Scams

Let's begin by highlighting the top seven Paypal scams that we have encountered over the past year or so. These are scams that are taking place all over Paypal right now, so you need to know about them.

1. Problem with your account

The ‘Problem with your Account' PayPal scam is, in reality, little more than a regular phishing scam.

It involves scammers sending out fake emails telling you there is a problem and urging you to click on a web address link to log into your account and sort it out.

This link from the sender's address will invariably take you to a fake PayPal site. This fake PayPal is where hackers will harvest your log-in details, access your account, and steal whatever they can get.

The fake website scam is simple to avoid.

Never respond to fake emails of this kind and never click on any hyperlinks that a fake email might carry. If you are concerned, log into your Paypal account through your usual browser directly and see if there are any problems.

If not, report the fake email and the sender's email address to [email protected]. Also, make sure to have your spam filters on.

2. You have money waiting

This is a very similar scam to the ‘Problem with your account' con.

It involves an email telling you there is a money transfer waiting in the seller's PayPal account and includes a link encouraging you to click and sign in to your account.

Again, it will be a spoof site, meant to steal a seller's account login credentials, and quite likely your money too.

Whether it is a seller's login credentials or funds, your goal is to avoid going to the phishing site. Instead, go to PayPal directly, log in normally and again report any such spam emails to [email protected].

3. Advance Payments

Everyone likes a windfall and this is one of the common PayPal scams that play on that desire by telling you that there is a large PayPal payment waiting for you, either because you have won money, inherited money or been refunded money.

But with this scam, there is always a catch and it is that to claim your funds, you first need to make a small handling fee through Paypal. The reason given for this is usually something like covering transaction fees.

But if you send this small sum, the scammer will then cut all contact and you will never hear from them again while they walk away with your ‘small sum'.

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Kaspersky says, “It's not unusual for online scammers to use so-called advance payment fraud, a classic Internet scam, to defraud PayPal users.” (Source)

The best way to avoid falling victim to this scam is to use your common sense. If an offer sounds too good to be true, it probably is. And you should never send money to an unverified Paypal account.

4. Alternative Payment Methods

Sometimes when buying goods on Paypal, the seller will ask you to use the Friends and Family option to save them paying a charge.

But this option is not permitted for buying and selling items and it leaves you with no recourse if the item doesn't arrive or is not as described.

Always use the correct Paypal option to ensure if the transaction does prove to be dodgy, you can get your money back.

5. The Overpayment scam

This scam happens when you agree on a fee with someone and then they send you more than the agreed fee.

They will contact you directly and apologies for the error, asking you to reimburse the difference. They will usually ask you to do this to an account outside of Paypal, indicating a scam.

Once you have done that, the scammer will then file a complaint with PayPal, claiming their account was hacked, thus withdrawing scammer-paid money from your wallet.

Paypal will withdraw funds and reimburse them the full amount. After Paypal reimburses the funds to their billing addresses, they walk away with the overpayment too. All that victims are left with are fraud claims.

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The US Federal Trade Commission has been warning as far back as 2004, saying “The scammer asks the consumer to wire back the difference after the check is deposited. Later, the scammer's check bounces, leaving the consumer liable for the entire amount.” (Source)

To avoid this, never reimburse money outside of Paypal and don't do it until the rest of the transaction has been concluded.

6. The payment pending scam

Account pending confirmation is a simple scam involving a buyer claiming that Paypal won't release their money to you as seller unless you provide a shipment number first. They may even provide fake transaction details as proof.

Obviously, to get a shipment tracking number, you have to have dispatched the item. Once you have done this, the dodgy buyer disappears with the item without ever paying you for it.

7. Shipping address scams

There are a number of different scams in operation around shipping addresses.

One involves requesting you use a preferred shipping company. The buyer then redirects the item, claims not to have received it, and demands a refund through Paypal.

A similar scam involves the buyer providing their own prepaid shipping label instead of using a regular company.

Once the item is dispatched, the same scam is played out. Another version involves giving an invalid address and then rerouting it to a valid shipping address when the delivery company can't deliver it before making the same claim.

Always double-check shipping, especially if you are shipping high value items.

How to avoid scams as a seller

Now that we have outlined the seven widely used Paypal scams, the next step is to consider what steps you need to take to avoid such scams.

This advice can vary depending on whether you are the seller or the buyer, so we are going to look at these two types of Paypal users separately:

  • Report it – The first and perhaps most important step is that, in Paypal's own words, ‘It's extremely important to report any suspected instances of fraud.' This helps them to crack down on fraudsters' scam email and stop others facing the same issues you do.
  • Set up Two-Factor authentication – This helps to prevent your account from being compromised by adding an extra layer of security.
  • Never ship your goods to an invalid delivery address – This makes it easy for scammers to claim they haven't received it and demand their money back.
  • Use signature confirmation of delivery where possible – This provides a dependable paper trail of your shipment in the event of any blowback.
  • Monitor your Paypal account – This helps you keep an eye out for any unauthorised activity that could reveal that your account has been compromised.
  • Never refund money – If you receive an overpayment, do not refund money until the rest of the transaction has been completed and you have a paper trail to fall back on.
  • Don't accept partial payments – Sometimes, scammers might try to get you to accept payments split across several PayPal accounts owned by the same seller, which are more likely to result in several “failed delivery attempts.” Don't accept this kind of deal.
  • Use shipping company and payment methods you are familiar with – If you are pressured to use new services, this should be one of the biggest red shipping company flags.

Above all, use your common sense. If a buyer is acting unusually and making irregular requests, assume the worst and don't proceed with the transaction.

How to avoid scams as a buyer

But how about if you are a buyer? Some of the advice to avoid Paypal scams for buyers is the same, but others are different.

Here is a rundown of the key points to bear in mind:

  • Report it – Again, if you get a PayPal scam email or see unauthorised activity in your account, report it straight away. Paypal are always at pains to remind users that “you're protected against unauthorised transactions sent from your account.”
  • Ignore spam emails – Do all your Paypal activity in your account. Don't respond to emails and don't under any circumstances click on email links. According to Symantec, nearly 55% of UK emails are spam and one in every 3,722 emails in the UK is a phishing attempt. You are better off not trusting any emails than running the risk of falling victim to one yourself.
  • Use security software with anti-phishing features – This will help to keep spam emails out of your inbox and firmly in the junk folder where they belong.
  • Set up Two-Factor authentication – Just as for sellers, this helps to prevent your account from being compromised by adding an extra layer of security.
  • Don't disclose your Paypal account details to anyone – Even if you give them to someone you know, they could end up in the wrong hands. It isn't worth the risk.
Paypal resolution centre

Reporting issues is easy.

On top of this, using your common sense is also a key thing.

If an offer seems too good to be true, it probably is and if a seller is acting suspiciously or asking you to do something out of the ordinary, it is best to always assume the worst.

Statistics

The UK's Action Fraud claims that UK users lost £7,891,077.44 due to fake emails between January 2020 and September 2020. (Source)

How Paypal can help

PayPal offers two types of protection for its users:

Buyers are entitled to a full refund and have up to 180 days to dispute a transaction. According to PayPal's seller protection program, sellers are entitled to get the full purchase price.

It is advisable to keep up to date with both of these protection policies as the details do change on occasion.

Paypal also offers various means for people to report fraudulent activity to them and we actively encourage anyone who encounters such activity to do so since this helps to reduce the risk for other users.

You likely won't stop the scammers, who likely have multiple PayPal accounts, but you can still contribute to stopping their operation.

Summary

Sadly scams and fraudulent activity are every bit as commonplace on Paypal as other payment platforms and Paypal's popularity means they can affect more people here than anywhere else.

In this guide we've provided you with some sage advice on how to avoid these phishing scams and keep safe when using Paypal, whether you use a PayPal business account or one for personal needs.

The warning signs are there if you know where to look, and learning about them can prevent buyer/seller losses and can even save the seller's actual PayPal account.

A lot of the most common Paypal scams are easy to avoid if you know about, which is why we have outlined the most common in this guide.

There are also a number of simple steps all users can take to keep themselves safe when using Paypal too.

We have detailed the keys ones above but if you take just one thing away from this guide, it is to use your common sense. If a deal sounds too good to be real, or someone is acting out of the ordinary, it is always safest to assume the worst.

Do you have any top tips for staying safe on Paypal? I would love to know, so drop me a comment below.

Author: David Spencer

Cyber-security & Technology Reporter, David, monitors everything going on in the privacy world. Fighting for a less restricted internet as a member of the VPNCompare team for over 5 years.

Away from writing, he enjoys reading and politics. He is currently learning Mandarin too... slowly.

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