This scam is usually initiated by someone you sold something to and requested them to pay you on PayPal. Instead of paying for it with Goods and Services, they make a request to you that they pay with Friends and Family.
This is advantageous for them because it decreases the fees involved. There is less for them to pay overall, since they are not required to pay any fee to PayPal for Friends and Family, however, this common scam is bad business for you.
Friends and Family payments should only be made to people you know and trust and only for gifts or to help someone out. This payment method should not be used to pay for products and services purchased online from strangers. That is not how PayPal is designed to work.
Keep in mind that you only get payment protection and fraud protection from PayPal for payments that are issued as Goods and Services. PayPal charges a fee for those kinds of transactions, and then the company can use that fee to help cover any lost, stolen, or unsent goods. The fee can be used to help cover business disputes. There are lots of instances where some help from PayPal can come in useful, whether you are the buyer or the seller.
You should beware of sellers asking for you to pay with Friends and Family, just as you should be wary of buyers asking to use that payment option. You are leaving yourself open to fraud, especially if you do not know the person or you haven’t bought tr sold to them before.
The request to pay with Friends and Family on PayPal rather than Goods and Services is known as an alternate payment request, and you should regard each and every one of these with suspicion.
This kind of transaction may seem cheaper all around, since there are no fees involved, but it could put you in a bad situation if something happens with the transaction. What could go wrong? Let’s list the possibilities for sellers dealing with buyers who ask for this alternate payment method:
- The buyer’s payment method fails to be verified and processed
- There is a dispute between you and the buyer
- There is a delay in the payment
- The buyer is not happy with the product or service
- The buyer claims the product was lost during shipping
- The buyer changes their mind about the product or service
Here are some things that could go wrong if you are the buyer and you are dealing with a seller who wants to use Friends and Family as a payment method on PayPal:
- The seller does not send the item or provide the service requested
- The seller says they did not receive payment even though it shows up on your end
- The seller changes their mind about providing the service or item
- The seller leaves a bad review because of a dispute with you
In any of these scenarios, you will not be able to go to PayPal for help in resolving the issue. It may cost a bit more for one party by using Goods and Services as the payment option, but it can be worth it for the peace of mind you get from having PayPal to back you up in case of a dispute. In many instances of a payment dispute during a transaction, PayPal will refund the money and cancel the transaction.
Keep in mind that PayPal does not allow Friends and Family to be used as a payment method for business transactions and purchases. According to their rules, which you have to agree to use the service, you are not allowed to pay for goods or services using the Friends and Family option. If you violate those rules, you can have your account limited by PayPal or even be banned from the service. You do not want to put yourself at risk of not being able to use your
PayPal account and having to set up a new account.
No matter what kind of service or goods you are getting, whether you are paying for professional cleaning services (see more) or professional editing, or you are paying for an item you found online, you should stick to using Goods and Services as the payment method. Otherwise, you open yourself to risk and to the possibility of having a business dispute that you have to handle on your own and without the help of PayPal.
It’s more than just disputes you have to worry about, though, when you receive an alternate payment request. You also need to be concerned about outright scammers. Many people who are looking to take advantage of others will use this alternate payment method to scam to get money from people as well as free goods and services, and there is little that can be done once you choose this payment option rather than what PayPal recommends. The rules that PayPal has in place are there for a good reason, and you should try to operate within the framework they have laid out, for your own safety.
It can be attractive to eliminate the fee involved in a transaction on PayPal, but that’s how many scammers will get you. They know there is appeal in sidestepping the fees, and they can often get unsuspecting people to forgo their better judgment just for the sake of a deal and the savings of a few dollars.
Once money is transferred in this way, though, you have no way to resolve any dispute, and you have no recourse left to you if things go wrong.
PayPal will protect Goods and Services payments for weeks after the transaction has occurred, so even if there are no red flags right away, if something goes wrong later, you can still enjoy their protection.
Don’t be lured in by this scam that can easily happen when doing business online with people you are not very familiar with. If they request to only be paid in Friends and Family payments or they ask to pay you that way, you should turn them down.