I've used Paypal for a number of years but still frequently wondered. Are there any actual dangers to using it? What chances are there for abuse or fraudulent account use?

I have been using it for quite awhile, and I never encountered anything that harms my account, credit cards or personal details. I think it's a secure website you should trust. Moreover, for people in certain locations, PayPal is the only reliable choice.

Yes I agree that there is no real alternative. Yet just recently a friend lost $500 on a transaction because the account used to pay was fraudulent. Despite offering a genuine service and the service being used, she lost out everything. So there are dangers-I just want to know how to avoid them.

If you pay money to a fraudulent / hacked PayPal account, and the fraudsters / hacker clears the funds before PayPal has a chance to investigate, you will lose the payment.

If you receive a PayPal payment that was funded through a credit card, the buyer can file a charge back with his bank. You can of course dispute a PayPal charge back. PayPal will communicate with the disputing bank on your behalf. However, unless you have tracking details to prove delivery of the goods to the buyer's credit card registered address, you will lose the payment. This is why you should never send goods to buyers who pay from an unverified PayPal account. Unverified means that PayPal has not verified that the account's registered credit card is actually linked with the account's mailing address. Therefore, if you send an order to the PayPal's registered mailing address, but the mailing address does not match the credit card's registered address, if the payment is disputed by the buyer you will have no recourse to defend it.

Finally, if you receive a payment sent from a hacked PayPal account, PayPal reserves the right to reverse it. In this scenario however it will be difficult for the hacker to modify the hacked account's registered address. Or, at the very least, the hacked account will show as Unverified due to the hacker changing the account's registered address but not verifying it.

Thank you.

PayPal can immediately freeze your account and hold your money. This is a private company and not ruled by any federal banking regulations, therefore have no need for your permission or approval for freezing your account. If they feel that you have committed a fraud or violated their policy they might freeze your account and hold your funds till further notice.

When your account is frozen It might take a while till PayPal decides to release your funds. And might leave you with very limited options and without proper explanation.