The Corner Penthouse

PayPal is set to remove the "Backup Funding" option from Business Debit Cards on September 12, 2023. Read on to learn more about the removal of this "security feature"...

I have been a PayPal user for 20 years now, give or take a year or two. I signed up on referral from my late, great friend Doreen Mulman, back when they were offering cash bonuses for sign-ups. Initially, I was due $10, but by the time I got them to confirm my bank account and finish setting up my account, they only gave me $5. I always found it to be a great way to send and receive money between individuals, be they friends or people paying me for items I sell on my website. It's also a great way to buy stuff from merchants without giving them my bank account information, and thus giving them unfettered access to my money. They get the amount agreed upon in the order and they can't decide to take more later. That makes PayPal a great piece of security, since it serves as a "pass-through" between my bank and the money recipient.

Since not all merchants accept PayPal (I'm looking at you, Amazon), I have a PayPal Business Debit Card to provide this same type of security. By default, the debit card will pull money from my PayPal balance, but if the balance isn't enough to cover the transaction, the "Backup Funding" option will enact a bank transfer to cover the remainder. Since I rarely keep money in my PayPal account - as they are not a bank, they are not protected by the FDIC, and I don't trust them to hold my money; just transfer it - the "Backup Funding" option allows me to, essentially, do a PayPal-pass-through bank transfer to pay merchants who don't accept PayPal.

As extra security, I keep my PayPal debit card locked at all times, except when I go to use it. This has proved vital in keeping my money secure, since the old shitty New York Community Bank I used to use did not provide any option to lock my bank debit card. The PayPal debit card gave me security that NYCB did not! Having that lock on the PayPal debit card stopped a postage company from stealing $10 from me in 2021.

On August 24, 2023, I logged into my PayPal account to the Debit Card Management page and saw a rather peculiar note at the top of the page:


The note says, "Backup funding from a linked bank account ends 9/12/23. See other ways to add money to your balance." In other words, if the money doesn't already exist in the PayPal balance, the transaction will be declined. This makes the card USELESS to me, as I don't keep money in my PayPal account for security reasons. As I already stated, I only use it as a pass-through from my bank to the merchant, so that the merchant is never given my real bank information. For me to use it now, I would have to initiate a bank transfer, and then wait a day or two for the money to be added to my PayPal balance. Not only does that make me unnecessarily wait when I shouldn't have to, but I would have to know in advance just how much in total an order from a merchant is going to be in order to transfer enough money to cover the purchase.

Although this change is supposed to go into effect on September 12th, PayPal has already removed the "Link Bank Account" option from the card management page.  Some people have even reported that transactions are already being declined, way before the September 12th deadline, because bank transfers were not automatically initiated. It seems like PayPal has already turned off Backup Funding.


What makes this matter even more insulting is that PAYPAL NEVER E-MAILED ME TO TELL ME OF THIS IMPORTANT CHANGE! About a week prior, I received a "Changes to PayPal's Legal Agreements" e-mail, but nothing specifically about this. The e-mail, of course, didn't spotlight any of the changes. It just pointed users to the page of legal mumbo-jumbo that, let's be honest, no one is going to to read. eCommerce Bytes pointed out that mention of the removal of the "Backup Funding" option is buried within all of that legal text. It would have made more sense, especially since PayPal knows I used the debit card several times in June and July, for PayPal to have sent me an e-mail specifically to alert me to the removal of the "Backup Funding" option. Some people got an e-mail like the one below on August 17th; I did not.


Why is PayPal killing the "Backup Funding" option? I surmise that it's because PayPal wants the interest they can make from the money sitting in our PayPal accounts. Greediness is the reason PayPal makes all of their changes, which are usually not beneficial to their users. I have a long history of jumping through hoops because PayPal didn't want to give up some money.

Thankfully, I'm not in as much of a bind as I would have been a few years ago when I was with the shitty NYCB bank, as they never provided me with a way to lock my bank debit card and they had a daily 10-transaction limit. My current bank actually provides me with a card-locking option and several other security features. As such, I can use that card with the few sites that don't accept PayPal, and keep it locked until moments before I use it.

The PayPal debit card did provide me with a measly 1% cashback for my purchases, which I will now lose out on, but that really just amounts to losing pocket change. 1% is really just ONE PENNY for every Dollar spent. I'd have to spend $100 just to get back $1. Since most of my purchases are under $100, I'm only losing out on loose change. I'd get more just going around the neighborhood collecting cans and bottles :-)