Why PayPal Bans Dropshipping Stores Over Tracking Codes

Paypal is one of the leading payment gateways that makes sending and receiving money globally accessible. So, why does PayPal ban dropshipping stores?

PayPal is mainly used by individuals and business owners with online businesses or personal affairs that require online transactions.

It is a secure and reliable payment solution that makes it easier and faster for customers to make payments. With PayPal, you can quickly transfer money securely from one account to another without worrying about your personal information being compromised.

You can also set up recurring payments or automate payments so the transaction goes through without hassle.

Plus, PayPal offers excellent customer service and 24/7 online support, so you can rest assured that your customers’ payments are safe and secure. With PayPal, customers can feel confident knowing their financial information is safe.

Plus, they’ll appreciate the convenience of paying for products or services quickly and easily.

Dropshipping is the latest innovation in the eCommerce world, and, based on reviews and online chatter, it seems PayPal bans Dropshipping.

Stores and startups are worried about why and how they can get past having their money on hold for 180 days during the cash release period.

If you have been an active drop shipper, I believe you are a member of either 2 or 3 dropshipping Facebook groups; at least you’ve witnessed complaints from members about PayPal placing limits on their accounts or holding their cash, and then later banning them from using the platform.

There are many reasons why 95% of dropshipping stores close without testing further. PayPal is one of the biggest reasons people quit Shopify and the dropshipping business in general.

So why does PayPal ban dropshipping stores?

Paypal may ban dropshipping stores for various reasons, such as running a high-risk business, having many customer disputes, potential fraudulent activities, violating PayPal’s terms of service, or suspicious payment patterns. Dropshipping store owners must comply with PayPal’s policies and ensure transparency and customer satisfaction to avoid such restrictions.

Invalid Tracking Info

As an online business dealing with products, you are categorized by default as an eCommerce business by PayPal. They know you are shipping products from your store’s warehouse to your customers.

It is only normal for a product shipment to include tracking info designed to help resolve disputes and serve as delivery proof.

When PayPal notices that you mainly ship products without updating the shipping information in your account, they start scrutinizing your account, from your website product types to any disputes related to the store.

Unlike the manufacturer in China, you are not dealing with shipping or inventory; hence, you have no control over the process and cannot provide a tracking code.

PayPal limits most stores and can no longer access their cash due to a failure to provide proof of shipping.

As a dropshipper, you can use auto-PP tracking code apps that automatically create tracking codes whenever you get an order; this will help resolve the tracking code issue with PayPal.

Lack of Inventory

Paypal hates dropshipping; thus, the hashtag #paypalsucks trends in almost all the dropshipping groups on Facebook. They want you to have inventory and be able to ship products from your warehouse; the lack of this only proves you are dropshipping, or they say, dropshipping is a risky business, and they don’t want you involved in.

The reason they usually give ”The type of business you are in is risky ‘; hence, you will no longer be able to use PayPal.

This is because PayPal hates chargebacks and disputes; they want the seller always to win conflicts, but one can’t do that without proof of the product and tracking info.

They tend to favor shops that sell products they control and can ship from their warehouse, and that provide tracking information.

PayPal makes money; disputes and chargebacks mean losing money; they will do anything to clean their database and remove risk-marked businesses from their platform.

Disputes

PayPal is keen on how you handle your customers and the quality of the products they receive. Disputes, chargebacks, or claims are complex to avoid when dropshipping.

This is because you have no control over the product’s quality, shipping duration, or inventory. You will face disputes from customers citing the following;

• Products not as described
• Broken Products
• Products never arrived
• Poor quality

If you are poor at customer care and replying to emails is one of your weaknesses, customers will file disputes to get a refund. The standard dispute rate accepted by PayPal is about 2%; when you exceed that, they will place your account on hold, either permanently or temporarily, until the issue is resolved.

This is one of the reasons PayPal banned dropshipping Stores: you need to consider the time it takes to resolve issues and how well you take care of your customers, especially after sales.

You can offer incentives to reduce the disputes in your PayPal account, and it works magic.

Lack Of Documentation

When starting a dropshipping business, you must use a business PayPal account. That account must include your business name (Name of your store or company), business number, and other essential business documents as per their policy.

At some point, when faced with limitations or disputes, they may require you to send the business supporting documents.

In most cases, drop shippers lack these vital papers, the account becomes restricted and later limited, and money is withheld for 180 days.

You must register the company and have legal documents validating your online activities before signing up for PayPal.

Read Also:

• 10 Dropshipping Challenges In Africa That Kill Dreams
• Is Walmart Dropshipping Profitable?
• Is Temu Good For Dropshipping Business?
• Is It Better To Dropship Or Ship Yourself
• What’s The Difference Between Amazon FBA And Dropshipping

Proof of Address

When selling online, we live in a world of possibilities; some prefer to use others’ details and lie about the business location.

Paypal insists on this; they need to be answerable for tax-related issues, hence the need for every platform user to use their real details and exact locations.

When using PayPal for drop shipping, there is a transaction limit that, when reached, requires you to verify specific details, such as location and identity.

Failure to provide the location and identification proof will result in your account being banned. Most dropshipping store owners fail to provide this when PayPal requests it, and some also use P.O. Box addresses on their PayPal accounts, which PayPal can’t verify.

Conclusion

PayPal bans dropshipping stores daily for failing to meet the above requirements; it hates the dropshipping business because it is full of disputes and claims. If you wanted to start a dropshipping business in 2026, then make sure you trade carefully on their platforms.

They sometimes limit accounts without apparent justification; some have accused them of extorting cash from high-performing stores by banning them from their platforms.

There have been accusations that PayPal traded with the withheld cash, made a profit, and released the initial funds after 180 days.

What do you think are the best PayPal alternatives for dropshipping business owners?

Share your comments below.

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