While there are many advantages to using PayPal, the company and its services also have its disadvantages, including its practice of putting a hold on account funds without notice. There are also some fees associated with using PayPal, which some consumers consider a disadvantage.
PayPal charges fees for sending money with a credit card or for receiving certain types of funds. PayPal may also charge fees to users with business accounts, and they can charge these fees on every transaction the user makes.
When PayPal freezes a user's funds without notice, this makes it impossible for users to transfer funds to a bank account or send money to another person. PayPal can also put a hold on funds that were sent in relation to an item purchased online, and the company may decide not to lift the hold until the item is delivered.
Another disadvantage of PayPal is that the company has similar functions as a bank, but it does not have the protections that banks provide from the FDIC. Because of this, consumers risk losing the funds in their accounts if PayPal unexpectedly shuts down. PayPal is also not held to the same laws and regulations that traditional banks are.