About Funding Sources

PayPal allows you to make payments using a variety of funding sources including: your credit card, Visa or MasterCard debit card, transfer from your bank account, PayPal Smart Connect offered by GE Money bank, and eBay gift certificates or similar redemption codes. Your protection against undelivered or defective goods will vary depending on the funding source, the type of purchase, and the location of the purchase, so it is important that you review this page to understand how protections differ.

This page explains PayPal’s default funding sources, your ability to select a preferred funding source, and your funding source rights and remedies.

Regardless of the funding source you select, PayPal provides 100% protection against losses from unauthorized payments sent from your account if you notify us on a timely basis, and PayPal never shares your financial information with the seller unless required by subpoena, court order or similar legal process.

Default Funding Sources

If you have multiple funding sources available, PayPal will fund your transaction as follows:

BalanceIf you have a balance in your Account, PayPal will always use your balance to fund your payment.
Funding SourcesIf you do not have a balance or your balance is not sufficient to fund your entire transaction, PayPal will fund your transaction, or the remainder of your transaction, in the following order:
  • Balance (if any).
  • Instant Transfer from your bank account (if you have registered your bank account).
  • PayPal Smart Connect or PayPal Extras MasterCard.®
  • Credit card/debit card.
  • eCheck from your bank account (if you have registered your bank account).
Recurring PaymentsIf you have a balance at the time the merchant processes your payment, PayPal will use your balance instead of your Preferred Funding Source.
Merchant Processing DelaysIn order for a merchant to receive a payment from your PayPal account, you must authorize the payment and the merchant must process the payment. Sometimes there is a delay in the time it takes for a merchant to process the payment. If you have selected a preferred funding source when you authorized the payment and at any time prior to the merchant processing the payment you have a balance in your account, PayPal will use your balance to fund the payment instead of your preferred funding source.

Selecting a Preferred Funding Source

In some, but not all instances, PayPal will allow you to change from the default funding source to a preferred funding source. If PayPal allows you to select a preferred funding source, and you take the steps necessary to select a preferred funding source, then the preferred funding source will apply instead of the default funding source. If you would like to select a preferred funding source, you may do so each time you send a payment or establish a recurring payment. You may select a preferred funding source by clicking the link on the payment confirmation page and selecting from your available funding sources.

If you have a balance in your account, we will require you to make your payments from that balance, except that we will allow you to select eCheck or PayPal Smart Connect as your preferred funding source instead of balance. If you have a balance and do not want to use it to fund your payment, you must withdraw your balance before initiating your payment.

In order to manage risk, PayPal may limit the funding sources available for a transaction. If we limit the funding sources, we will alert you that there is a higher-than-normal level of risk associated with the payment. Such a notice does not mean that either party to the transaction is acting in a dishonest or fraudulent manner. It means there may be a higher-than-normal level of risk associated with the transaction. You may choose to continue with the transaction with the understanding that you may have fewer avenues available for dispute resolution should the transaction turn out to be unsatisfactory.

Funding Source Rights and Remedies

PayPal Protections:

PayPal provides 100% protection against losses from unauthorized payments sent from your PayPal account regardless of the funding source used, as long as you provide PayPal with timely notice. See section 12 of the PayPal User Agreement for terms and conditions.

For items purchased on www.eBay.com, PayPal provides buyer protection up to $2000 for eligible items, and up to $200 for all other items (except intangibles, vehicles, and live auctions).

For items purchased on www.express.ebay.com, and eligible items purchased with PayPal Smart Connect, PayPal provides coverage for the full purchase amount.

For items not purchased on www.eBay.com, or www.express.eBay.com, your recovery will be limited to the amount that PayPal can recover from the seller’s balance.

In order to be eligible for these protections, you must use PayPal’s Online Dispute Resolution Center and comply with the requirements in section 13 of the PayPal User Agreement.

PayPal’s Online Dispute Resolution Center:

We encourage you to file a dispute through our Online Dispute Resolution Center if you have a problem with a transaction. By filing a dispute, you can attempt to resolve your problem directly with the other party. If you are unable to come to resolution, you may escalate the dispute to a claim and we will evaluate it under our buyer protection programs.

You must file a dispute within 45 days of the date of the transaction, and escalate the dispute to a claim within 20 days of the date the dispute was filed.

If you cancel your dispute/claim or if PayPal denies your claim, you may still pursue your credit card chargeback rights or rights that accompany any other funding source. If you timely file a dispute with PayPal and then escalate it to a claim, and we do not complete processing of your claim until after your credit card issuer’s imposed deadline for filing a chargeback or after your bank’s deadline for filing an Electronic Fund Transfer Act dispute, and you recover less than the full amount you would have been entitled to recover from the credit card issuer or the bank, we will reimburse you for the remainder of your loss (minus any amount you have already recovered from the seller or PayPal).

You may not pursue a dispute or claim with PayPal and a chargeback with your credit card issuer at the same time. If you initiate a dispute or claim with PayPal and then file a chargeback with your credit card issuer before we have had a chance to resolve your dispute or claim with us, PayPal will cancel your dispute or claim and you will have to rely solely on your credit card chargeback rights.

Credit Card Protections:

If you used a credit card to fund a purchase of goods or services through PayPal, you may have chargeback rights granted by your credit card issuer. Credit card chargeback rights, if they apply, can be filed more than 45 days after the date of the transaction and cover the full amount of the transaction. Credit card companies must abide by these statutory guidelines:

  • If a consumer claims “billing error” because an item is not received or refused, the card issuer is obliged to investigate, resolve, and correct written consumer claims filed within 60 days of receipt of statement.
  • If a consumer claims a dispute with a merchant, the card issuer is obliged to investigate and resolve consumer claims, provided the consumer: (i) has not paid for the charge (ii) has made a good faith attempt to settle dispute (iii) lives in same state as or within 100 miles of the merchant and (iv) paid more than $50 for the item.
  • The card issuer is obliged to investigate and resolve consumer claims provided the consumer: (i) has not yet paid for the charge (ii) has made a good faith attempt to settle dispute (iii) lives in same state as, or within 100 miles of, the merchant, and (iv) paid more than $50 for the item.
In addition to chargeback protection, credit card issuers provide certain protections against unauthorized transactions. You should contact your credit card issuer to learn more about your rights and remedies.
Bank and Debit Card Procedures and Protections:

Your debit card provider is required to provide coverage for unauthorized transactions, and may voluntarily provide chargeback rights similar to those provided by credit card issuers. Your bank is required to provide coverage for unauthorized transactions resulting from bank account transfers and eCheck transactions.

PayPal has the ability to processes debit card transactions through an ATM debit network. If you would like to have your transaction processed through the Visa/MasterCard network, you may do so each time you make a payment by clicking the "Funding Sources" link on the payment confirmation page. Choosing the Visa / MasterCard network may give you certain protections and benefits, including possible chargeback rights.

Not all debit card purchases will be processed through the ATM debit network, depending on network limitations and risk evaluations. If we do not process your debit card payment through the ATM debit network, we will process it through the Visa or MasterCard network.

You should contact your debit card provider and bank directly to learn more about your rights and remedies.