If your PayPal account balance becomes negative then PayPal will restrict you from using various PayPal services. Your PayPal account will become limited unless you put the balance back into positive. Moreover, if your PayPal account is linked with your bank account or credit card then PayPal might take the balance from your bank account to cover the negative balance. If your PayPal account remains negative for at least 90 days or more then PayPal will close your account. If the negative balance is too high then PayPal might pass your account to a debt collection agency!
Key Takeaways
- Revers transaction due to customer disputes is one of the main reasons for negative balances on PayPal
- Bank Revers Transaction is also known as ACH returns and usually, it happens when the buyer doesn’t recognize the transaction and files a dispute against the transaction
- When a transaction is made from your PayPal account, you have to authorize the transaction and then PayPal will deduct the balance from the account
- If your PayPal balance becomes negative then there are quite a few ways you can solve the problem like receiving a payment from someone, adding funds to your account, etc.
Reasons Why PayPal Balance can become Negative
There are many reasons, a PayPal balance can become negative. If you are wondering what are the reasons then check the below information.
Reason – 1: Revers Transaction due to Customer Dispute
One of the main reasons people use PayPal is to receive payments from customers. This is why customer dispute is also the main reason PayPal balance can become negative. Let’s say you have sold a product and received the payment via PayPal. Then you have withdrawn the amount from your PayPal account or used the balance for other purposes. So, your current PayPal balance is Zero. Now, if the customer doesn’t want to receive the product, return the product, or filed a claim against your PayPal account then PayPal will withdraw the payment from your account and return it to the customer. Now, you have already withdrawn the balance so, your PayPal balance will become negative. This type of incident is very common for merchant PayPal accounts.
Reason – 2: Bank Revers Transaction due to Customer Dispute
This type of problem is also common for merchant PayPal accounts. Bank Revers Transaction is also known as ACH returns and it happens when the buyer’s bank account was used without proper authorization. Moreover, if the buyer doesn’t recognize the transaction then might file a dispute against the transaction. Another common reason it might happen is when someone gains access to a customer’s debit card and use it to purchase goods and services. If it happens then the Bank authority works on behalf of the client to resolve the problem with PayPal. So, if the bank wins the dispute then PayPal will take the balance from your PayPal account and it might result in a negative PayPal balance.
Reason – 3: Insufficient Balance
If your PayPal has insufficient balance to cover a big purchase then PayPal will allow you to continue the purchase with your PayPal account. But doing so will create a negative balance for your PayPal account. For instance, you are trying to purchase a product worth $1000 but your PayPal has $850 on it. Now, PayPal will allow you to make the full payment and put -the $150 balance in your account. Next time when you deposit money into your PayPal account, PayPal will deduct the negative balance and make your account positive.
Reason – 4: The Transaction was not Authorized
When you initiate a payment from your PayPal account, PayPal doesn’t take the funds immediately from the account. You have to authorize the transaction and then PayPal will deduct the balance from the account. Till the authorization, PayPal will put a negative balance on your account. Once you authorize the transaction, PayPal will remove the negative balance from your account.
Reason – 5: Buyer’s Scam
PayPal has excellent security protocols to help prevent against fraud but it isn’t always possible. There are many incidents where scammers get access to PayPal accounts and use the balances to make various purchases. In this type of situation, the PayPal balance could go negative. If you become a victim of a PayPal Scam then you should contact PayPal’s resolution center and file a complaint.
Reason – 6: Linked Credit or Debit Card is Compromised
If your PayPal account is linked with your credit or debit card, and if your card is compromised then there is a chance, your PayPal account balance becomes negative. For example, if you lost your credit card that is linked with your PayPal account and if purchases are made using your credit card then it will cause your balance to go negative.
How to Resolve the Negative PayPal Balance Problem
If your PayPal balance becomes negative then don’t panic. What you should do in this type of situation is, make your PayPal balance positive as quickly as possible. There are quite a few ways you can easily resolve the negative PayPal balance problem. Here are a few options –
- Receive a Payment: If your PayPal has a negative balance then you could receive payments on your PayPal account and make the balance positive. For example, If your PayPal balance is -$150 and you receive a $200 payment to your account then your current PayPal balance would be $50.
- Make a Payment: You can resolve the negative PayPal balance problem by making a payment. While making the payment, you have to add the “negative balance” amount to the same transaction. Let’s say your PayPal balance is -$30. You want to make a payment of $50. Now if you add the “negative balance” amount to the transaction then your card will be charged $80 and your balance will become positive.
- Transfer Balance/Add Funds: You can transfer funds from one PayPal account to another or add funds to your negative balance PayPal account and make the balance positive. There are many ways you can add funds to your PayPal account. You can add funds from your debit card, credit card, direct deposit from a bank account, and many more.
- Authorize/Decline Pending Transaction: If there are any pending transactions on your PayPal account then you should authorize or decline the transaction and remove the negative balance from your PayPal account.
- File a Complaint: If the negative balance on your PayPal account is because of fraudulent activities then you should immediately contact PayPal and file a complaint. Then PayPal authority will investigate your case and if they find your complaint valid then they will solve the negative balance problem of your account.
Consequences of having a Negative Balance on a PayPal Account
- If your PayPal balance becomes negative then PayPal will make your account limited
- You won’t be able to use all the features of the PayPal account
- You won’t be able to make any payments using the account
- If your bank account is linked with your PayPal account, then PayPal might take the negative funds from your bank account to make the balance positive
- If the balance remains negative for long, then PayPal could close the account
- If the account has a huge negative balance then PayPal might send your account to a debt collection agency
- You might receive a letter or a call from the debt collection agency
FAQs about What happens if your PayPal Account Goes into a Negative Balance
How long can you have a negative PayPal balance?
There is no exact time period to have a negative PayPal balance. However, if your PayPal balance remains negative for 90 days then PayPal can close your account and forward it to a debt collection agency. So, if you want to avoid the consequences of having a negative PayPal balance then you should quickly make the balance positive.
Does PayPal’s negative balance affect credit score?
Yes, PayPal’s negative balance does affect the credit score. If your PayPal balance remains negative for long period then it may get turned over to a collections agency and hurt your credit score!
Can PayPal sue me for a negative balance?
Yes, PayPal can sue you for a negative balance. If PayPal owes you a large amount then they can hire a lawyer to file a breach of contract lawsuit against you and sue you for unpaid or past due.
Does PayPal use debt collectors?
Yes, PayPal uses debt collectors. If your PayPal balance remains negative for more than 90 days then PayPal will forward your account to a debt collection agency. Then, the debt collection agency will try to recover the debt from you.
Can PayPal freeze my bank account?
No, PayPal can’t freeze a bank account. The bank authority can only freeze a bank account for various reasons. However, PayPal can freeze or permanently close your PayPal account.
References:
https://www.ictsd.org/how-long-can-paypal-money-be-overdrawn/
Last Updated on November 5, 2022 by Magalie D.
