What is a PayPal echeque?

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Jan asked today, on TameBay “What is an echeque?” and I guess it’s time to explain. According to Paypal an echeque is “an electronic funds transfer that withdraws money directly from your bank account. It’s just like writing a cheque, only it is done electronically.

Basically it’s a way for users to fund payments if they don’t have a valid credit card on file with PayPal. The downside is that it’s not an instant payment. When you send money with an eCheque from a UK bank account, the transaction is held as pending for seven to nine working days, until the electronic funds transfer clears your bank.

Now the good news is that once an echeque has cleared it will never be subject to a chargeback in the way that a credit card can be. For the seller it’s a much safer form of payment albeit a slower one. Of course if the payment turns out to be fraudulent or the buyer opens a dispute with PayPal the payment may still be reversed. However with a credit card it’s much easier for a buyer to simply dispute the payment and have the funds reversed outside of the PayPal processes.

Sadly PayPal have never managed to get echeques working reliably. Sure the funds arrive but the email messages are often incorrect. As Jan found out often emails have suggested echeques will clear in four working days, but that’s only in the US. Although UK emails have frequently stated four days it still takes seven to nine working days for the payment to clear. This is simply a bug that PayPal are working to correct.

Why do buyers pay with echeques so often? The answer is because they often don’t realise they’re about to. If their credit or bank card has expired the payment will default to an echeque. Also if a buyer doesn’t wish to use their PayPal balance (if they have one) the only option is to send an echeque. To avoid this and use a credit card the entire PayPal balance has to be withdrawn from your account before you can make a credit card funded payment.

The biggest problem with echeques is having waited seven to nine working days for them to clear, sometimes they don’t. It still takes seven to nine working days to find out that they payment has failed, and then the buyer has to repay.

The beauty of buying on eBay is the speed at which transactions can be processed and that’s why PayPal fits the eBay marketplace so well. By delaying payments and then if they fail having to start the payment process all over the transaction can easily take three or four weeks to complete. That’s a terrible buyer experience and even worse often the seller isn’t informed that a payment has failed. PayPal don’t appear to send emails or indicate in recent account activity that the payment has not cleared so it may be some time before the seller and buyer realise they need to initiate another payment.

PayPal echeques are easily their worst product. PayPal is a fantastic payment processor with relatively low fees, it’s easy to open an account and almost everyone is eligible to send and receive payments through them. Echeque payments just don’t live up to PayPal’s reputation and for all of the reasons above I believe 2008 should be the year echeques are discontinued.

9 Responses

  1. Since I opted to block eCheque payments in my Payment Receiving Preferences, I have had a handful of attempts that have been blocked, despite the option indicating the eBay sales would not be affected.

    The buyer receives a message along the lines “that I am unable to accept their payment as my account details may have changed” – which has prompted the buyers to message me about it. Each one has then simply used a credit or debit card to make the payment through Paypal, and all has worked out fine so far, with no unhappy or wary buyers.

  2. Steve, I had one buyer who waited until I opened an Unpaid Item Dispute to inform me he got that message. By that time he’d already purchased elsewhere assuming I was no longer trading under the same name 😯

    There’s an error in echeque blocking and I’d strongly recommend anyone selling on eBay does not block them regardless of preferences on external websites 🙁

  3. “Jan asked today, on TameBay “What is an echeque?” and I guess it’s time to explain”

    Many thanks for the posting….:)

  4. “This is simply a bug that PayPal are working to correct.”

    How long does it take to change the wording of an email? That has to be one of the most ridiculous exuses ever.

  5. What I dont understand is why it takes so long, if a normal cheque only takes 3-5 working days why does an echeque take 9 days. I paid for something literally minutes after winning the auction on the 21st of January and it states in my paypal account an expected clearance date of the 31st of January. If I was a seller I would be really peed off but as I dont have a credit or debit card I dont really have a choice when it comes to paypal.

  6. I made a purchase with ebay last month. Bought on the 22nd, left my bank on the 24th and paypal have informed that it takes 16 WORKING days. A whole month with my money sat in their account

  7. Not to happy about eCheques. I started selling due to a shortage of funds. Still waiting after the date specified it would clear. Did not send goods as advertised by Paypals e-mail.
    With the current changes is feedback, a lot of sellers are going to be put off, me included.
    For paypal to keep the funds in their account and gaining interest on my money,as well as charging you for transactiosn is quite horendous.


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