Oh, no. Something’s wrong. You can’t process credit cards or debit cards. You’re not sure what happened, but you’ve had your PayPal account frozen. You might start to panic: “What happened? What did I do wrong? Can PayPal freeze my account?” And then, “How to unfreeze a PayPal account?”
Or maybe you got an email from PayPal with the following message:
- you can no longer do business with PayPal
It’s tough on any merchant when this happens — especially if you’ve done nothing wrong. It means you lose payment processing, order fulfillment abilities, and access to your funds.
You’re shut down. Dead in the water. What can you do about it?
There’s no denying PayPal is one of the most convenient options for stores and customers alike. Being able to store all types of payment methods lets shoppers pay however they like, making checkout fast and easy — good for customers and you. The primary payment on file is charged if a shopper’s PayPal balance can’t cover a purchase. If the primary payment method has insufficient funds for the purchase, PayPal simply moves down the list of payment methods until a card or bank account can fulfill the cost of the cart.
So, say you started small with a few items listed on eBay or had a small Etsy shop. You decide to advertise or add new products. You begin experiencing growth, and sales are climbing, and so are your revenues. Your business is going places.
Then one day — out of the blue — you realize your PayPal account is frozen. Did you violate the terms of service and the user agreement or inadvertently engage in fraudulent activity? As fast as you grow your e-commerce business, PayPal effectively shut you down. Now what?
Can I unfreeze my PayPal account and get back to business as usual?
PayPal is great for small businesses — until it isn’t.
When the company began, it seemed perfect for small-scale business owners who didn’t sell conventionally. For some businesses, it’s still perfect. But PayPal has a lot of rules that some businesses find too strict, such as limiting transaction volumes or merchant category types. If this isn’t too restrictive for you, it might be the right option. But for sellers in high-risk industries, PayPal’s terms of service aren’t a good match.
Why’s my PayPal account frozen?
PayPal is a lot like Stripe — the company doesn’t offer payment solutions to just any business. PayPal isn’t a payment processor at all — it aggregates payments. A payment aggregator doesn’t offer merchant accounts nor the seller freedoms that come with them. Rather, you’re a seller allowed to do business using PayPal’s merchant account — PayPal essentially gives you a sub-account under their umbrella.
Because the company is an aggregator and not a processor, they’re at great risk when they allow high-risk categories to have an account. Because of this risk, there are numerous reasons why your PayPal funds may be frozen. With Bankcard, you get an actual high-risk merchant account with more freedom and lower fees. If you set off their alarms with PayPal, a frozen account could shut down your store.
Some reasons your account can get frozen include scaling too fast and having more disputes than normal.
Scaling too fast
In what world is growing your business a crime? Well, it’s a negative against your business in the eyes of payment aggregators like PayPal, Stripe, and Square. Say a few months into opening your business, and sales start to soar. If you process payments over 25,000 USD, it’ll set off a trigger. This growth pattern causes PayPal to put your account into review status. They’ll look at your account activity, and while they’re reviewing, you won’t be able to operate. Life coaches, personal trainers, drop shippers, and supplements companies often experience PayPal account frozen status.
More disputes than normal
Every business has dissatisfied customers from time to time. But if your customer disputes increase by just a couple, you’ll get flagged. Say your business typically gets five disputes every 30 days. If you get seven disputes in 30 days, PayPal will freeze your account while they investigate.
PayPal doesn’t mess around with chargebacks or refunds. They’re on top of PayPal users’ average monthly disputes and chargeback ratios, so you need to be sure you don’t exceed 1% chargebacks. Even if a dispute doesn’t put you over the 1% threshold, your business can still be flagged if PayPal thinks your account is suspicious or a potential risk. In their defense, the company is protecting itself from fraud and illegal activity.
You can maintain a low chargeback ratio by enforcing a strict refund policy and disputing any chargebacks.
How long can PayPal freeze my account?
PayPal can freeze your account and its funds for up to 180 days. If you don’t do anything, you’ll get your frozen funds back in six months. If you’re difficult to work with — or PayPal feels you’re not cooperating, they can extend the normal 180-day wait time.
Is PayPal able to freeze your bank account?
You might logically make the connection that if PayPal can freeze your PayPal account, which is connected to your other financial accounts, can PayPal also freeze your bank account?
Thankfully, no — PayPal doesn’t have this type of reach. Their only power is freezing the account you have with them, which includes:
No, this doesn’t include your bank account, but that doesn’t necessarily mean it’s safe. Frozen PayPal accounts often end up on a list that alerts other payment processors and merchant account providers to your status with PayPal, which can affect your ability to get a future account. Thankfully, Bankcard specializes in these high-risk merchant accounts. We can prevent you from losing out on business because PayPal froze your account.
If you’re asking why PayPal froze your bank account, the account freeze may have inadvertently alerted your bank, and your bank froze your bank account — but typically, bank account funds are not frozen even if your PayPal account is.
How to unfreeze a PayPal account
There’s only one way for you to unfreeze your PayPal account, and that’s to wait 180 days till your PayPal funds are released. But thankfully, there are a few ways you can still operate your business in the meantime. Also, remember that when your account gets frozen at PayPal, it isn’t a human that sits and watches, presiding over which accounts to freeze. It’s an algorithm and automatic. If your account sets off one of PayPal’s preset triggers, your account is automatically flagged and frozen, even if you’re not involved in any scam. So, how to unfreeze your PayPal account?
If you log in and find your account frozen, you’ve likely violated the acceptable use policy. You’ll see a notice taking you to PayPal’s Resolution Center. The steps to unfreeze a PayPal account are listed here, including:
- Proof of establishment includes tax documents, utilities or bank account information, your Doing Business As registration documents, contact phone number, etc.
- Proof that you shipped the item that caused the trigger
- Proof of your identities, such as your driver’s license, Social Security card, a state ID, or passport
- Proof that you possessed the product in question, such as contact information for the supplier
Then, send this information to PayPal and await a response. It can be excruciating waiting for your funds to clear to be able to begin accepting payments through your PayPal business account again. Still, the Resolution Department will typically reach out to you the next day to let you know your documents have been received. Then, it may take a few days, but you’ll receive an account limitation decision. Your PayPal account will either be unfrozen or remain frozen for the full 180 days.
That truly seems like forever, and for many small businesses, it, unfortunately, means closing their doors for good.
You can call PayPal’s customer support team, but it may not help. Reps may be able to help reinstate your account, but more often than not, they can’t do anything — and it isn’t their fault. A kind conversation with your rep could get the ball rolling in the right direction.
How do I keep my business open with a frozen PayPal account?
You don’t have to close your business if your PayPal account is frozen, and there are a few ways you can still operate.
Open another PayPal account
If you remember when you opened your currently frozen account, you know that opening a PayPal account is pretty easy — no underwriting, for instance. But having a fresh PayPal account doesn’t mean you won’t get frozen again. PayPal for business is a very use-at-your-own-risk option for business.
Open an account with Stripe or Square
These payment aggregators work the same — applications are simple, and setting up your account for business happens within a business day. But, just like having an account with PayPal, these aggregators can also freeze your account according to their algorithmic triggers. Suppose your business is in a high-risk industry, or the aggregator thinks you are. In that case, you’ll need a solution that works with these businesses — a solution that solves the PayPal account frozen dilemma.
Your third and best option is to find a merchant account provider that specializes in high-risk merchant accounts, like Bankcard.
Other reasons PayPal freezes accounts include logging in with different IP addresses and having a large PayPal account balance. No matter what, any activity outside your account’s norm causes the company to view your account as a risk and will freeze your account until you can prove otherwise.
How to know if your account’s been frozen by PayPal
After — no, not before, but after — you’ll get a PayPal account frozen email. It won’t say much more than “your account has been frozen.”
Now, there are also a lot of emails that are simply SPAM or spoofed PayPal emails. If your PayPal account is frozen, but you haven’t received an email, review your junk or SPAM folder. Either way, you’ll know your account’s status the next time you log into your account. Logging in regularly is important — staying on top of your account can help you rectify situations before they affect your sales as much as you can.
Opening a (high-risk) merchant account
Don’t wait for PayPal to investigate and potentially release your frozen funds. You should immediately begin searching for an actual merchant account during this process. Of course, you want and need your money, but a high-risk merchant account is the only next step to ensure this never happens again.
Suppose you opened a Stripe or Square account in the interim, good. But honestly, that isn’t a sustainable course of action because the same thing could happen with these providers.
And your business relationship at PayPal is now marred. They may not even reinstate your account even if they release your payments freeze. Hope for your PayPal account to be your only account isn’t advised.
How does a seller get their money back?
While you’re waiting for PayPal to settle this account dilemma, say you decide to open a new PayPal account. So, your store is back up and running, you’re processing sales just like before, but your previous account’s funds are still stuck.
In nearly 99% of these cases, you’ll be waiting the entire 6-month period to get your funds released. You can keep calling PayPal’s resolution team and asking for release, but this may not help. You can, however, ask for a staggered funds release.
PayPal holds your frozen funds in the event any disputes or chargebacks arise from the purchases. Without your frozen funds, PayPal would suffer a loss if they had to cover this on your behalf. Ask if a certain portion of the frozen funds can be released monthly until all funds have been released. The longer time between the original purchase dates, the less chance a dispute or chargeback will arise, so PayPal has been known to enter into this type of agreement.
While this solves this particular PayPal frozen account dilemma, it doesn’t mean you won’t have more in the future. You need a more long-term fix for your business.
Partner with a High-Risk Merchant Account Provider
Because the answer to “Can PayPal freeze my account?” is a resounding yes, and to unfreeze a PayPal account takes forever, a merchant account is your best option. A merchant account can keep your business open without worrying that your funds will become frozen and tied up for months. Sure, PayPal offers convenience, but Bankcard offers peace of mind. Get in touch with our knowledgeable representatives and secure your high-risk merchant account today.