Rito Entrepreneur, YouTuber, Digital Marketer. Founder of Flying Start Online. Dream big, make it happen, and just do what needs to be done!

Common PayPal Dropshipping Issue & How To Avoid It (Bizathon4 Episode12)

3 min read

PayPal account issues

Last month We Built A Profitable Shopify Store From The Groud Up.

If you’re new to FSO we build businesses from scratch every 30 days…

The Bizathon Challenge!

Last month was a huge success, not just for our team, but for many.

Because of this, we’re continuing with Shopify as the focus for Bizathon4.

This month we’ll scale our Shopify income by utilizing pro-level tactics.

Watch the video to avoid running into a common PayPal trap:

Today we’d like to discuss something serious with you.

You’ve likely seen many videos and posts online talking about how to make it big online with Dropshipping.

They almost never bring up the downside of the business.

Especially when it comes to PayPal.

I want to share what recently happened to Rito.

Be vary wary when doing business with PayPal. 

Especially if you’re a drop-shipper.

Avoid PayPal Dropshipping Issues

It all started about a month ago.

If you’ve been drop-shipping for a while, you’ve likely encountered this.

Otherwise it may happen in a month or a couple months…

And there is a 99% chance it WILL happen to you.

No payment provider is particularly thrilled about the drop-shipping model.

Especially not PayPal. In fact it’s considered “High Risk” by the company.

Since Rito’s drop-shipping business revolves around AliExpress, many promote the same products.

Unfortunately within the internet marketing space there are an absurd number of thieves, liars, and scammers tarnishing the good reputation of those subscribing to ethical business practices.

Before going any further let me say this…

If you’re doing more than $1,000 dollars per week in transactions, I invite you to use Stripe. 

Their dispute resolution and customer service is second to none.

If this is not possible because of the country you reside, you must make do.

Just know once you’re doing high volume, you will have account reviews and a reserve applied.

An account reserves takes and holds a percentage of every sale for 30 days as an insurance policy.

Lately our FSO associated Facebook pages have been receiving messages from people pretending to be our customers as well as real customers who were duped into believing they purchased from us.

After searching names, phone numbers, email and transaction numbers, 9 out of 10 times, they didn’t purchase from us. 

None the less, our account has been frozen 3 times in the last month.

PayPal Account On Hold

CommonPanda has shipped more than 500 products since launching.

All the while using PayPal as the primary payment processor. 

During that time (about 1.5 months) our account was put on hold three times.

Two were related to disputes being opened due to products not being received.

And the other was for a damaged product being shipped.

With the disputes over products not being received, all we had to do was provide PayPal the tracking numbers.

This proved the items were in transit the disputes were immediately resolved. 

The third time our account was placed on hold was due to a customer receiving a defective product.

We refunded the money, told the customer to keep or discard the product and sent another one for free.

The customer was stoked and we saved face. 

The problem was PayPal didn’t remove the hold from out account this time. 

Instead they escalated the situation by freezing the account and preventing transfers until a Review was completed.

To be fair we could still process orders during this time. We just weren’t able to make any withdrawals.

The next part is a headache but by no means the end of the world.

Most PayPal account reviews are resolved within 72 hours. 

Getting A PayPal Review

Rito PayPal Review Document

As part of PayPal’s commitment to provide the best experience for buyers and sellers. We perform routine reviews of merchant accounts.

This was the message emailed to Rito, which accompanied a list of demands to be met before restoring account standing.

Here’s what they needed to ensure we were legit:

  • Tracking information for a handful of random transactions
  • Estimation of monthly sales volume for next 6 months
  • Written statement detailing our refund policy
  • Resolution of any existing buyer complaints
  • Explanation of increased payment volume
  • Any details about inventory management
  • Copies of original bills of sale
  • Contact info for suppliers

Be Honest & Transparent With PayPal

Don’t try to hide anything. 

Be as helpful and forthcoming as possible regarding how you run your business.

If they sense you’re hiding something it will not end well.

Be sure to provide everything they ask for within the email. Take your time and make sure you’re thorough.

Send screenshots and links where applicable.

Include your company logo on the document you send to convey professionalism. 

If you haven’t been shipping products, you won’t be able to provide tracking numbers so your account will be shutdown and any funds seized.

I know the #RitoTribe doesn’t get down like that, but it should still be said.

When your account get’s reviewed don’t freak out.

Calmly address the situation like a true boss and it will be resolved.

Any business has ups and downs – this will always be the case.

Take your lumps and keep moving forward.

That’ll do it for Episode 12 – Great work!

Questions, comments or just want to say hi?

We love hearing from you in the comments section below!

Success by choice, not by chance,

-David Aston


If you’re not kept in the loop via our #Bizathon definitely sign up today.

P.P.S. Click here for Episode 13!

Rito Entrepreneur, YouTuber, Digital Marketer. Founder of Flying Start Online. Dream big, make it happen, and just do what needs to be done!

24 Replies to “Common PayPal Dropshipping Issue & How To Avoid It…”

  1. Hi David,

    I have used Viabox as my business address for returns, since I am not based in USA. When I sign up for a business account with Paypal, do I need to use that address or must I use my real physical address? I am not sure if customers will see conflicting addresses when they check out using Paypal?


  2. Got stuck in situation similar to what you described – PayPal asking for tons of information (which is essentially none of their business) and keep sending the same copypasted messages over and over again. No real communication with them at all.

    Would you mind sharing what you provided them to fix that issue (with all meaningful information blurred, for sure) – just to give the structure of the answer to deal with them?

    Thank you!

  3. Dear Mr.Ritoban, I am a newbie in dropshipping business. I don’t have any company registered . my query is regarding paypal. I just open my paypal business account and I have problem with company verification , I dont have any legal documents. what should I do? as far as dropshiping concern should i go with paypal premium instead of PayPal business account.

  4. Hello sir,
    I already integrated PayPal into Shopify store.
    But I try to checkout then show error. please help me to solve out the issue.

    We are not able to process your payment using your PayPal account at this time. Please return to the merchant’s website and try using a different payment method

    how to solve this issue?

  5. hi
    i love your video every time i know something new
    i have just some question please if you can help me
    i find a wining product and i have started making up to $10k a day but PayPal has limited me for 180 day
    – so i want to make a new start
    1- is if i open a new PayPal account i need to change the domain with a new identity and new credit card
    2- is new PayPal account no problem i don’t want to get limited from the start
    please some help and if the are some other info please can you provide me with it

  6. Hey Rito chacha I am having problem with paypal business account setup.
    Can you please help me??
    Please tell me about this.
    What should I choose in “Product or Service keyword”
    “Purpose code”

    Please help me.

  7. Hi Rito,

    Hope you are doing good:)

    I have a query, if we have multiple shopify stores then can we use same paypal account for all the stores? Or should we create new paypal account for each store?

    Thank You.

  8. Hello,

    May I ask what you answered regarding the inventory management question? Did you say that your business is a dropshipping one or what did you answer to those questions?

    I see they also asked for copies of the bills referencing the purchase of the items. Don’t those show that the item was shipped directly to the customer, and not to you? Can that be an issue? I am planning on opening a legal company for this.

    Thank you in advance !

    And also, do you think it might be an issue if a new PayPal account will be used? I never had an account with them before.

  9. hello Rito,

    I am having a problem with PayPal business account setup.
    What should i choose in “product or service keyword”?
    I can’t find “Retail” (1019) and sub category could be “Variety Store” (2184)
    I think it got updated now.
    Please help me!

    Thanks for your time.

  10. Hello Rito,
    I’m in the begining of my DropShipping career, and I’m stuck.
    I came across a video of another dropshipper who said that you need your own credit card to purchase the product until the customer recieves their product, and that Paypal doesnt pay out until 1-3 weeks. How true is this?

    1. You do need your card to pay for the product. But PayPal releases funds the next day if your account is in good standing

  11. Hi Rito chacha,
    i created shopify store in india but my brother is in canada . he has canadian bank account , address and SIN number.if he creates a STRIPE account or SHOPIFY PAYMENT account in canada then can i use his accounts in my indian dropshipping store ??

    plz help me out 🙂

  12. Hi, in the screenshot they gave you transaction ID and told you to provide Tracking, how do you find the products from the transaction number so you know which product belongs to this transaction ID? Thanks

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