What Consumer recommends that you only use Paypal when absolutely necessary due to Paypal Buyer Protection limitations .
Where possible use a Credit Card for items over £100 to ensure the transaction is protected by Section 75 of the Consumer Credit Act. This makes the credit card company equally liable if there is a problem. For purchases less than £100 use a Visa debit card to benefit from the protection provided by the Visa Chargeback Scheme. However, if a trader only accepts Paypal, all is not lost:
Visa Card for Paypal Payments
When you use your Visa card you can make a claim under the Visa Chargeback scheme. An existing balance in your Paypal account can complicate this, as it makes it more difficult to show that a Visa debit card was used for a particular purchase. It is important to note that you must make the claim within 120 days of the transaction.
Paypal payments using credit cards other than Visa are not protected by section 75 of the Consumer Credit Act.
Buy from UK Sellers
Buying from UK traders gives you the benefit of a number of consumer rights. These rights apply across the EU, but it is fair to say it is easier to enforce these rights and resolve disputes with sellers in the UK. Caution is needed as it is not always immediately obvious which country a company is trading from and pricing in pounds does not always mean they are UK based.
Paypal Buyer Protection
If you didn’t use a Visa card, and didn’t buy from a UK trader then you have to rely on Paypal Buyer Protection.
If Paypal has closed your dispute and you are not happy with this then the only option open to you now is to take your complaint to the Financial Ombudsman (FOS).