A guide to echeques - for both buyers and sellers

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I've received a few Paypal payments by echeque but there was no explanation as to exactly what constituted an echeque. When I had to contact Paypal over another matter, I enquired about echeques and thought it might be helpful for others to understand the benefits and risks of echeques. The explanation below applies to ebay transactions, so the words sender and buyer are interchangeable, as are the words recipient and seller.

When you make a Paypal payment by Credit Card, it is an immediate transaction and the recipient actually has the funds in hand as soon as he receives the email and your credit card account will be charged simultaneously. If you have a Debit Card, the procedure is similar but your bank account is debited in the same manner as any other Debit Card transaction.

But when you are making a payment direct from your bank account but not using a Debit Card, that is when the transaction becomes an echeque. The buyers that have dealt with me have been unaware that their payments have been treated in this manner, presuming that the payment is going through straightaway. In fact it takes well over a week for the recipient to receive payment. Once the buyer has completed the payment instruction, Paypal sends an email to the seller advising that an echeque payment has been received and an estimate of the clearing date. This will be 8 banking days after the payment was originated. The buyer's bank account is debited after 4 banking days and the seller's Paypal is credited 4 working days after that, when a further email is sent to the seller confirming that the echeque has cleared. The payment shows on the seller's account with the original date and the status of "Cleared" as opposed to "Completed" for other transactions.

When I have received echeques, I have been concerned that my buyers might be expecting their goods on a certain date so I have contacted them to warn them that their goods would not be sent until the payment had cleared. Those buyers have all been surprised that their payments were not immediate, so I suspect that the majority of echeque users do not know even that they are echeque users.

And now the important bit: as the detailed feedback rating is affected by how quickly customers receive their items, it is tempting to send out the goods as soon as you have received the echeque. RESIST THE TEMPTATION! An echeque can be cancelled late in the transaction cycle, with no notification of the cancellation. I have had one defaulter who (according to the transaction status on my Paypal account page) cancelled the transaction on the expected day of clearing. A number of ebay sellers refuse to accept echeques and I can appreciate their position as it may be difficult for sellers with large volumes of transactions to keep track of cleared and uncleared items. If you have a more manageable level of transactions, you should apply caution and not send goods until the payments have cleared.

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