Another article for the domain newbies — don’t be like me and only learn that PayPal isn’t safe after someone scams you through it!

Paypal makes it very easy to reverse payments. If someone’s Paypal account is hacked, Paypal will reverse the payment and you’ll be left with nothing should they complain the transaction was unauthorized. If someone pays by credit card through Paypal, they have the option of convincing their credit card issuer they didn’t receive the goods and again, you’ll be left with nothing (and possibly even fees for the credit card chargeback). Credit card issuers almost always side with the buyer. Simply put, don’t accept Paypal (other than Paypal MassPay) for amounts larger than you would be comfortable losing. While a PayPal rep told me that MassPay can’t be reversed, I have my doubts about whether it’ll protect you from more complex fraud involving multiple hacked Paypal accounts and the participation of third parties who may not be aware of what’s going on. Nevertheless, Paypal MassPay is much safer than Regular Paypal granted it must be funded from your bank account and hence offers no credit card chargeback risk.

Delaying delivery of domains a week after receipt of payment can substantially reduce the likelihood of being scammed with Paypal. Paypal doesn’t usually get involved in digital good disputes. You stand a much better chance of winning if you complain the transaction was unauthorized than if you complain about not receiving the domain that you bought. Unfortunately, many scammers are also aware of this fact and will attempt to reverse charges by claiming the transaction was unauthorized.

Keep in mind that other than with escrow service, security for sellers and security for buyers is almost always inversely correlated – that is, the safer a payment method is for buyers, the less safe it is for sellers and vice versa. One one extreme, you have PayPal who is very pro-buyer, on the other extreme, you have Moneybookers and e-gold who are very pro-seller.

Be wary of Paypal eChecks – much like regular checks, don’t consider yourself paid until the eCheck clears. Many people think Moneybookers is 100% safe – it’s not. If your buyer pays through Moneybookers with a credit card, you could find yourself in trouble. Credit card chargebacks are something one always has to worry about when using a medium which allows and doesn’t guarantee to cover any chargebacks which do occur. To reduce your risk of a future chargeback, consider not allowing payments through Paypal via credit card on domains you sell. Credit card chargebacks can still be filed months after the actual purchase – keep accurate and detailed records of all sales in the event a future chargeback presents itself and considering the fact the item is intangible (and hence comes without a shipping address), don’t be surprised if you lose. You should keep accurate and detailed records anyway, even if you opt to not accept credit card payments in the event you get audited.

Large foreign checks may take much longer to clear than normal checks (up to 2 months) if your bank decides to send them to collections. This is entirely up to your bank, being based in part on your history with the bank and in part on the size of the check. Whenever possible, ask about how a large check from a certain country will be handled prior to letting the buyer know payment by check is okay. Writing bad checks, forging checks, altering checks, and counterfeit check and money orders are unfortunately all too common, so it’s best to let the check clear whenever possible before considering yourself paid. Be aware that there is a difference between the money being in your account and the check having been confirmed as being good — your bank might put all the money or a portion of the money in your account immediately or within a few days, however this doesn’t mean that the check is necessarily “good”.

It’s best not to accept money orders or checks as it both complicates the selling process and exposes you to increased risk of a fraudulent transaction — there’s really no reason to accept either when so many people have PayPal accounts and there’s always the option of wire transfers for those who like to do things through their bank. If you live in Canada, one cheap way to do domain name transactions is via Email Money Transfer — ask your bank about that if interested.

US Postal Service money orders employ a number of security measures in addition to a money order verification service. It’s not scam-free, however it’s much more difficult to scam with than an ordinary check or money order, provided the recipient of the USPS Money Order knows what to look for . If people send you a larger check or money order than the domain purchase was for and ask you to send them back the difference, there’s a near-100% chance they’re trying to scam you.

Unauthorized funds of a different kind – unauthorized funds taken from your PayPal or other accounts, is another all too common problem. Get a Paypal security key to substantially reduce the likelihood of anyone ever fraudulently gaining access to your Paypal account and sign up for any additional security measures your credit card issuer and online payment providers offer. Some examples are: Verified by Visa and MasterCard SecureCode (ask your bank about them if you can’t find a way to sign up for them through online banking). Call your credit card issuer (number should be on the back of your credit card) or online payment provider and ask them if there are any additional security measures you can take to better protect yourself. A few more pointers would be to never give out your credit card number on a site which doesn’t use secure encryption such as SSL and to avoid all escrow services other than Escrow.com. If you’re doing a domain name transaction, you may also use EscrowDNS.com or escrow services offered by one of the larger domain name companies (such as Sedo, Afternic, Moniker, Namedrive).

Related posts:

1. PayPal MassPay
2. EscrowDNS
3. Virtual Credit Cards