Here's an important warning about PayPal.

You cannot issue a refund/cancellation of payment for a currency for which you do not hold a balance.

Let me set up the example to show why this is problematic (and a rip-off):

I keep only a US dollar balance. I had the payment receiving prefs set to allow payments in other currency with automatic conversion. That was the default and it's what I assumed would be the right way to run the payment side of my business if I'm charging US dollars to a world-wide audience.

Tonight I received a non-cart payment in Euros and it was automatically converted (buying Euros from me) to US. My net was let's say US$217 (or e158) on a payment of e164 with PayPal taking a 6.something Euro fee.

However this was part of a transaction I wanted to offer the buyer a discount on so I needed to credit them back some money. To make everything easier (so I thought) I decided to try and cancel the transaction. There's no CANCEL or DENY button, only a REFUND. So I pressed it and refunded the full amount.

I notice that nothing came off my total balance. I expected the transaction to be recalculated at the same rate and be sent back to him since this was a refund, not a new transaction.

Instead what I see is that PayPal is putting through a charge to my BANK ACCOUNT which is also in US dollars. They have calculated a new exchange (selling me Euros) which will take US$228 from my bank account to cover the e158.

Notice the problem there? With PayPal double dipping. It's a completely new transaction so they're covering the spread on the other end, selling to me rather than buying. Of course the whole issue is that they're not simply canceling the original payment.

The girl on the phone tells me they cannot cancel the transaction to my bank account once it's initiated. WTF? It's only supposed to clear Feb 1 and it can't be cancelled?

I've now set up my PayPal account to not receive any payments in currencies I don't hold. I'm hoping this isn't going to cause an issue for buyers and that any necessary conversions will happen on their end when they try to buy US dollar products from me.

On top of everything I may get the worst shaft of all, which is that my bank account is likely to be suspended in my PayPal account. That's because I'm next to positive that my bank account will not allow debit transactions from PayPal. The best I could get the girl on the phone to do was write a note on the account that said the payment was likely to be denied and to not suspend the account. With that account suspended I have no way to transfer out money without converting it to Canadian at PayPal's shit rates.