Unfortunately, it cost me $300 to find out about this loophole in the PayPal system... hopefully bringing it to your attention will save you a little money.
Have you ever read the fine print when you purchased a digital product or service through PayPal?
If you haven't read the PayPal fine print, then you're in for a surprise.
I admit that I completely skimmed over it myself... In fact, I never really noticed it at all until I had a problem with a someone not delivering what was promised when I made an online purchase of a digitally delivered service. (Click on the link to read the complete story about my experience with IBSoftshop and my review.)
Don't use PayPal for ANY intangible product or service!
I'm sorry, was that a little too obvious?
You'll find that some businesses only offer PayPal as a payment option. If you really want the product they offer, do your homework on them, search for reviews, visit some forums, etc. before you purchase from them... especially if it's a big ticket item.
There are a lot of very trustworthy businesses that use PayPal exclusively because it's so easy. You may not have the choice of another payment option.
If you have to use PayPal, use your own credit card rather than the balance in your PayPal account for digital purchases.
Your own credit card will have it's own dispute resolution and complaint process independent of what PayPal provides. If you don't get your product, complain to your own credit card company and it will most likely result in a chargeback on the merchant.
A merchant chargeback is expensive for the merchant... usually they lose all the money from the initial sale plus a chargeback fee on top of that. If you've used PayPal, then the chargeback will go against PayPal and will then be passed on to the merchant.