In order to earn miles & points, many people “manufacture spend”. That is, people find ways to increase credit card spend (to get rewards) while getting their money back. There are many techniques for doing this, and PayPal is a component of some of them. Unfortunately, while these techniques are perfectly legal, they are often also used for money laundering and other illegal activities. As a result, PayPal frequently freezes accounts of those who manufacture spend because they appear to be doing something illegal.
In response to a post about PayPal freezing accounts, an anonymous PayPal employee stepped forward and offered to answer our questions. In this post, I’ve re-written and summarized answers to four such questions. More questions may be answered in future posts.
Question: What are the triggers that lead to account reviews? Are new PayPal accounts more susceptible than older ones?
There are many potential triggers. Computer algorithms can flag accounts based on things like location, dollar amounts, and frequency of transactions. PayPal employees can also trigger reviews. For example, a customer service employee may trigger a review after you contact them or if they need to verify information. Similarly, a risk department employee may trigger a review if your account has chargebacks, explosive growth, trigger words, or if they receive a report from another business (such as InComm, which produces the MyCash cards).
New accounts aren’t necessarily more susceptible than older accounts other than the fact that they are more likely to require identity verification.
Question: Does Paypal freeze accounts for shuffling money around banks? I use PayPal to trigger bank account bonuses by moving money around between my bank accounts and hoping it counts as direct deposit.
I’m not sure, but the fraud department might see that as suspicious. ACH and Credit Card Fraud follow that exact pattern: add accounts, move stuff around, get a new checking acct or credit card. My guess is that the fraud team can distinguish between bank bonus mining and credit or ACH fraud, but I don’t know for sure.
Question: Is accessing Paypal though a VPN a higher or lower risk?
We look closely at IP Addresses: we check to see if people are connecting from consistent locations and devices, for example. VPNs can mask those things, so it is possible that your account will be flagged more quickly with VPN use. That said, I personally always use a VPN. I think that the protection given by a VPN outweighs the added risk of getting your account flagged.
Question: Suppose someone who has a frozen Paypal account waits the 6 months and then closes that account down. Will they then be able to open a new Paypal account in good standing with their SSN etc.?
Yes, that should work as long as you don’t continue to do the types of things that resulted in a frozen account in the first place. Keep in mind, too, that each person can have two PayPal accounts: a business account and a personal account. So, if only one is frozen, you should still be able to use the other one (or to create another one if you don’t already have a second account).