Why Is My PayPal Balance Negative? (6 Potential Reasons)

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PayPal is one of the most popular platforms for online payment.

Its success is due to the fact that it is accessible in more than 200 countries and supports 25 different currencies.

It allows transactions to take place digitally and effortlessly.

However, as with any form of payment, things can go awry, and your PayPal account may show a negative balance.

This could be due to a variety of things such as fraud, insufficient funds, buyer scams, and more.

Keep reading to find out why your PayPal balance might be negative for both buyers and sellers, and then you will learn what you can do about it.


1. Your Transaction Was Reversed Due To A Customer Dispute

Financial concept of chargeback


If you received payment for something you sold, and then withdrew the payment amount to your connected bank account or used it for another purchase, this would make your PayPal balance return to zero.

However, if the customer never received the goods, returned them, or filed a claim against you, there is a good chance that PayPal will withdraw the payment from your account and return it to the customer.

If you had already withdrawn those funds and your PayPal balance was zero, then this transaction reversal would make your account negative.

This is only relevant for merchant accounts.

If this happens and you did send the customer the requested goods and services in good condition, then it is possible to file a dispute with PayPal to win back those funds.

PayPal has a resolution center available 24/7 to help both merchants and customers with transaction issues.


2. A Bank Reversal Was Filed On Behalf Of A Consumer



Again, for merchant accounts, you may experience a negative account balance even if you delivered goods and services.

Bank reversals, also called ACH returns, occur when the buyer’s bank account was used without his permission, or the buyer did not recognize the transaction.

This often happens when someone unlawfully gains access to a customer’s debit card or PayPal account and uses it to purchase goods and services.

The bank is then responsible for filing the dispute with PayPal on its client’s behalf.

Unfortunately, if you, the seller, already withdrew the funds received for the goods, and the bank wins the dispute, funds may be withdrawn from your PayPal account, causing it to run negative.

Since this is not the fault of the merchant, consulting with the PayPal resolution center may help both you and the consumer, because PayPal has an allotted budget for fraud and scams for both buyers and sellers.


3. There Were Not Enough Funds In Your Account To Cover A Recent Purchase

Insufficient Funds write on sticky notes isolated on Office Desk


It happens to the best of us.

Just like when a credit card or debit card gets declined because the credit limit has been reached or there aren’t enough funds in the checking account, something similar can happen on PayPal.

Instead of declining your purchase, PayPal will allow you to carry through with the transaction and cover the difference for the funds that were not available at the time.

For example, if you purchase $100 worth of clothing from a boutique via PayPal but only have $70 available in your account, then your PayPal balance will run negative by $30.

If you have been a loyal customer with PayPal thus far, the company will cover your purchase under the pretense that you will be able to pay back the funds later.

To fix this, you will just have to add more funds from your connected debit or credit account to pay for the amount that PayPal covered, due to insufficient funds.

There could be fees associated with a negative PayPal balance, so it is best to keep more than enough money in your PayPal account if you use it regularly for purchases.

If PayPal is already authorized to withdraw directly from your bank account, it may bypass this step and withdraw that $30 from your connected account.

If your bank account also has insufficient funds, you might receive an overdraft or dishonor fee from your bank.

If you have not been a longtime or reputable PayPal user, then your transaction could be declined.


4. You Did Not Authorize Your Transaction

PayPal Logo On Digital Tablet


PayPal does not immediately take funds from your debit card, even if you have one on file.

You need to authorize the transaction for PayPal to take the money from your account.

In the meantime, PayPal will cover the payment for the transaction but will show your account as negative until you have authorized PayPal to withdraw the money from your debit account.

One buyer reported a negative PayPal balance even though she had a debit card connected to her account.

However, PayPal did not withdraw the money from her debit card after making an eBay purchase and instead showed that she had a negative PayPal balance.

The purpose of this is to avoid fraud and protect the consumer.

For instance, if someone made a purchase on your account without your permission, then PayPal will “withdraw” the funds from your PayPal account but not charge your debit card until you confirm it on the platform.

This way, it avoids adding a third-party bank to the fraudulent case.

It will show your PayPal balance as negative until you authorize the payment.

Then PayPal will withdraw the funds from your bank to fund the purchase.

The PayPal balance will remain negative until you authorize this transaction.


5. You Were Implicated In A Buyer Scam

Mad woman annoyed by having problems with smartphone


PayPal does its best to avoid fraud, but it isn’t always possible.

If someone gets your PayPal account information and charges it, your PayPal balance could go negative.

For example, if someone requests money from your account on PayPal, it can show that you have a negative balance even if you did not make any purchases.

The Federal Trade Commission reported several scams involving people claiming to be PayPal.

If you are trying to sell an item, but the buyer will only use PayPal, this could be a phishing attempt to gain access to your PayPal account to withdraw money.

This might come about in several ways: the potential customer might send you a link to “set up” a PayPal account in which you would input your information to make an account, and then that information would be sent to the scammer.

They would then gain access to your account and be able to withdraw funds.

Another scenario would be if the buyer claims to have sent money via a PayPal wire, with extra funds.

The person may ask for the funds to be returned because he sent too much money, but this is all a lie, including the extra funds he says he included.

This would make your account run negative if you never received any funds in the first place.

If any of these situations look familiar, contact PayPal’s resolution center, and ask them to open an investigation.

There’s a special email address just for this purpose, [email protected], to target persons masquerading as PayPal.

For large amounts of money, be sure to also file a case with the Federal Trade Commission and your local police department.


6. Your PayPal Credit Card Could Be Compromised

Worried young woman holding credit card


If you have a credit or debit card that is connected directly to your PayPal account, but this card is somehow lost or stolen, purchases made using your card will cause your PayPal balance to dwindle.

If your PayPal balance is zero, and then someone makes purchases using your card, it will cause your balance to be negative.

This card operates similarly to a debit card, except instead of being connected to a checking account with a bank, the card is associated with your PayPal balance.

This is especially popular for businesses that receive funds via PayPal.

Just as with any other credit or debit card fraud, a phone call to PayPal to cancel the card will likely open an investigation into the case and allow the company to refund the transactions.

Scammers are getting quite adept at gaining access to your information.

They might call, asking you to confirm your address and phone number (which are probably already accessible on the Internet).

They might know about your past transactions.

They will ask you to confirm this information, so you trust that they are indeed PayPal.

They might ask about potentially fraudulent activity on your card and ask you to read them your card information to “verify” that you are still in possession of the card.

This way, they gain access to your payment information while pretending that they are doing their due diligence to ensure that the card is in the right hands.

They can then use this information to carry out the fraudulent payments from which they were claiming to protect you.

This could cause your balance to run negative if they spend a lot of money using the card connected to your PayPal account.

If your account runs negative for too long, it could affect your credit score, so it is very important to keep tabs on your transactions by checking your PayPal account often to ensure that your balance is positive and all withdrawals are authorized.


How To Fix A Negative PayPal Balance

paypal on phone


If your PayPal account balance is negative, there are several ways to fix it.


1. Add Funds

The easiest way to restore a positive balance on your PayPal is to add money to your account.

If PayPal previously covered the difference for a purchase you made when you had insufficient funds, you can transfer money to PayPal via your bank account.

To add funds to your account, first sign in to PayPal and go to your Wallet.

Then click “Transfer funds.”

Click “Add funds to your balance” and follow the instructions on the following page.

You can add funds from your debit or credit card, direct deposit from your bank, or by mailing a check made out in US dollars to PayPal.

This can take up to three to five days to process, or even longer if mailing a paper check, so be patient.


2. Authorize (Or Decline) A Pending Transaction

Also, if your PayPal balance is running negative due to an unauthorized transaction, you can quickly log in to your account to authorize it (if the purchase is valid).

Then, PayPal will immediately withdraw the funds from your bank account, and your negative balance will go away.

However, if the unauthorized transaction was fraudulent, it is important to decline it and then call PayPal immediately to report the scam.

PayPal will then open an investigation and initiate a chargeback, which will hopefully restore the funds to you.


3. Contact PayPal To Discuss The Issue

Like credit or debit card scams, if your PayPal card is stolen or compromised, and fraudulent purchases are made using your information, a quick call to the PayPal resolution center will help you to cancel your card, get a new one issued, and refund any fraudulent transactions.

PayPal says that they never ask to verify your information via phone or text, so be wary of callers asking you for personal payment information.

For merchant accounts that show a negative balance due to bank reversals or buyer scams, PayPal also has protections to avoid profit loss.

It is important to contact PayPal as soon as possible though, to avoid a decrease in your credit score.

If you do not handle this promptly, your case could become invalid and PayPal will not open an investigation, causing your negative balance to become your responsibility.

To avoid negative balances as a seller, it is essential to ensure that buyers are legitimate, and never share your account login details.

For a business account that shows a negative balance due to a transaction reversal or chargeback, you can call PayPal to resolve the issue.

They have customer service lines built in to resolve disputes between customers and merchants.

If you can prove that the goods were sent in good condition on time, there is a good chance that you can win the dispute, or at least win back the money lost.

For both buyers and sellers, if your negative balance is not funded or resolved within 120 days, your account could be blocked, and you will not be able to log in to or use PayPal.

Since PayPal had to cover the amount of the negative funds, the company will likely contact you with a barrage of phone calls, emails, and letters to pay the owed amount.

If you still do not fund your account, PayPal could be sent the negative balance to a debt collection agency, depending on the amount.

This is hazardous to both your credit score and the credit score of anyone with whom you reside.

It can also impede your ability to buy a house, take out a loan, or sign up for a credit card in the future.



Overall, PayPal is a secure payment platform with a lot of protections built in to avoid fraud.

However, negative balances do happen.

Sometimes, it’s just because you had insufficient funds, and other times, it comes from scammers.

PayPal’s resolution center has proven to be very effective in reversing fraudulent transactions and tracking down scammers.

If you were the target of a digital payment crime, there is a very high chance that PayPal will be able to return the funds to you.

Otherwise, just be sure to authorize the transactions when necessary and keep depositing funds into your account to maintain a positive balance.

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