Quite irritated with this new Paypal thing. Had to make a payment online. Had the balance in my account. Had to use my credit card instead and unnecessarily incur a transaction charge AND currency conversion comissions for both this payment, and eventually for the dollars in my account when I withdraw them. I think it ends up almost 5% of the amount, possibly more.
Paypal was big news when payments and withdrawals to all Indian accounts were suspended last year. A lot of people had online payments stuck, money in their Paypal balance stuck and there was a lot of noise. Within a week, things were in order with one notable exception. Indian users had to enter their PAN number to be able to use their accounts.
Good! I thought. It is a big incentive integrating online income with regular accounting. Made sense. Great move.
Now, since this financial year, there are new restrictions, which are quite damaging for Indian users. Indian users are to withdraw all the payments they receive into their bank accounts. They cannot use this money to make purchases, which means they use their credit cards. The notice on my Paypal account says this is because the Indian government wants it like that.
Hmm.... this is either utter stupidity or some hidden agenda.
Let's see. You are some small time website owner or designer earning a few dollars per month. What happens to your income?
- It is deposited into your Paypal account at which point, there is a small transaction fee Paypal applies.
- EVERY month, you must withdraw your balance to your bank account according to these new rules, so your dollars get converted into rupees (at which point Paypal earns another commission)
- Then, these rupees are deposited into your "real" bank account. If the amount deposited is less than Rs.7,000/-, Paypal charges you Rs.50/- as processing fee.
- Oh wait, but you have to pay for your webhosting, so you use your credit card, incur another transaction charge.
- Wait more. Your card is charged in rupees, so Paypal does another conversion, you are charged another commission.
- All this so that you can withdraw the money into your account so that it can be taxed? Hmm.
And what is achieved? Many people earning those piddly dollars are not even in the tax bracket. Those who earn the big bucks are already businesses and their accounts include their Paypal statements.
Think of it as someone who earned $10 and spent $10. This person would end up losing approximately Rs.200 - Rs.300 or so including Paypal transaction fees, conversion fees and withdrawal fees and the credit card transaction charges. I'm talking off the top of my head, so if someone can do the math and comment, much obliged.
It made sense to the point of PAN card numbers. It would have made even more sense to loudly advertise that Paypal (and Moneybooker, etc) statements should be included in the annual accounts. Instead, we have added commissions for Paypal and credit card companies. Where did THAT come from?
How does it help either India or its people?
Many people used to save money in their Paypal accounts and use it directly to make purchases, or save it till it grew enough to not incur that Rs.50/- transaction charge. Now, they don't have that option, it seems.
So, what exactly was the purpose?
Update: Paypal now auto-withdraws funds to your account daily! Apparently because this is what the RBI wants!!!