PayPal to add a $20 ANNUAL Inactivity fee!

Well for me, I have a more important issue with Paypal. I can't login because they now force people to have a mobile phone linked to the Paypal account in order to send SMS authentication code. And I don't have a mobile phone.

So it seems I'll have ask them to close my Paypal account since I cannot do it by myself.

The timing is very bad, as I wanted to use Paypal to sell my Play Station one video games. So I'll have to find another digital payment method unless they decide to revise their policies.

Well, I think the problem is when you want to exchange money between 2 people. I used paypal in the past, yes to buy in certain stores like steam. But I also paid board game convention fees, I sued it for board game sales, furniture sales, etc.

If I want to sell video games from my collection on Ebay, I need to have a digital money transfer account. There are apparently many alternatives to PayPal, many have subscription fees. I'll have to do my research and evaluate which one is the best according to my needs.

Or simply hope that PayPal finally offers a non-mobile authentication system. But I would not bet on that to happen.

This sounds like the maintenance fees that used to be common with gift cards in the US. After a year, they would decrease the balance by a certain amount per annum until the balance vanished.

Gift cards are promotional tools, but they also represent "unearned income" that blights the company's balance sheet. The idea of a maintenance fee was that it would allow the issuer to eventually get lost/forgotten cards off their books.

Banks also used to pull a similar trick to get abandoned accounts off their books.

Not sure exactly how the regulations changed, but I haven't noticed any maintenance fees on gift cards recently, and banks now turn their abandoned funds over to the state.

My guess is that someone with too much time on their hands is going to sue and say that PayPal needs to treat its accounts like bank-deposit accounts. There will be a class-action settlement a few years from now, and we'll all get $0.09 checks in the mail.

The reason for the gift-card and bank-account maintenance fees doesn't have anything to do with interest, it has to do with holding money that the company has not "earned" in an accounting sense.

In essence, accounting rules treat a gift-card balance as a debt owed by the company. Having a bunch of debt on the balance sheet can mess with the company's credit rating. For a company that issues a lot of gift cards, having the lost ones accumulate forever as an unpayable "debt" can be disastrous.

(If I were to hazard a guess, the deal with regulators is probably that companies can't charge maintenance fees, but they get to write off the "debt" after a certain length of time. The company still needs to honor an old card, but its mere existence doesn't damage the company's credit.)

The accounting rules for banks are different, and a lot more complicated. For them, tiny accounts are a problem because it costs them a bit of money each year to maintain each (reporting requirements, FDIC insurance, fractional reserve, etc.). Regulators told banks they need to eat those expenses for a number of years, then can dump the accounts onto the state.

PayPal's situation is unlikely to be exactly like either of the above, but for some reason they don't want small balances parked in their system indefinitely. From the outside it seems like bank rules ought to apply, but nothing in financial regulation is ever simple.

I think it's been at least 15 years since I've seen interest paid to my bank account but I've most certainly been paying them about $10 a month for the privilege of having my money moving through there (even if I make zero transactions). :/

I would say there likely *is* a cost to PayPal to hold money, if only in data storage and upkeep. It does seem stupid to charge a fee for inactivity, but if all it takes is logging in once a year, it's not very onerous on the users end.