"Friends and Family" Payments 1

“Friends and Family” Payments

"Friends and Family" Payments 2

What these are, and why you should be exercise some caution.

A short time ago, there was a disturbance in the force. It didn’t look like a Hasher who was selling something was actually going to hold up their end of the bargain. I won’t get into specifics for everyone’s sake, but the topic came up about what actions people could take if this individual did not deliver the products that they promised.

Typically, you try to work things out with the person, but when all else fails you can usually first file a claim with PayPal, who will investigate the merits of your claim and return your cash if warranted. You can also use your Credit Card’s chargeback features, which is essentially the same thing but AMEX/Visa/Mastercard etc. handles the investigation.

Well the problem was, this person solicited payments via PayPal’s “Friends and Family” option. Why did this convenient money transfer option become a problem?

The “Friends and Family” option is meant to be used just like it sounds, to send and receive money between people that you trust. If you are exchanging goods and services using the “Friends and Family” option, then usually your seller is just doing it for fee avoidance. When you send money for goods and services, PayPal will take a 2.9% + $0.30 cut of the amount transferred and as the buyer you don’t even know it. By using “Friends and Family”, the seller is making sure that they are not charged any fees.

In 90% of cases this is no big deal, and in fact is a good thing. Take a charity for instance… it’s much better if we can avoid the fees and donate a larger amount. And while it is against the intended purpose of the program, there is good evidence to suggest that PayPal doesn’t even look at enforcing it.

However, there is a reason why it is free. According to PayPal, using the “Friends and Family” option makes the transaction ineligible for PayPal’s Purchase Protection Program. There’s the source of our problem in our original situation.

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So, if you are sending and receiving money via “Friends and Family” but are in fact buying and selling goods and services, just know that you have absolutely no recourse if things go wrong. As far as PayPal is concerned, you sent the other person a cash gift.

The good news, of course, is that we’re in a pretty tight community and there should be some avenues to rectify a bad situation outside of all this. But, it is still a good idea to stop and think before trusting someone you’ve never met, especially if it’s for a large amount. If the fees are too much for the seller, perhaps offer to cover the fee to send it correctly.

Or, you could also trust in the Hab Bazaar of course. This is definitely not even on the list of reasons why I created the site, but one of the side benefits to this is that it is set up on a fully integrated PayPal Business account… so all your purchases have full Payment Protection and are 100% guaranteed.

So that’s a quick and dirty on the reasons for using PayPal’s “Friends and Family” option, and the reason why it’s free to receive money. We just wanted to start a chat on this since it is so widely used in our community. What are your thoughts?

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