Paypal offers not just one but three separate ways for you to fund the payments that you make via Paypal.
Unfortunately, even Paypal themselves have overlooked the fact that they support three payment methods and not just two and apply some of their validations in the wrong order. While the actual payment itself will be made using cash funds from within your Paypal account itself if you have sufficient funds available (and will only go to your credit card or bank account if you don't have a high enough cash balance), the validation that is performed if the seller does not accept echeck payments is first to check that the buyer has a valid credit card attached to their account. This means that if the buyer doesn't have a credit card that they cannot buy from that seller even though they have more than sufficient cash actually in their Paypal account to make the purchase.
Turning off echeck payments using the option provided by Paypal also turns off the cash payment option for all accounts that don't have a credit card attached. This probably doesn't matter much when you are selling to the general public where few of your buyers will themselves be using Paypal to make sales (and hence acquire a Paypal cash balance) but it will make a big difference where you are selling something to others who sell via Paypal. Those selling web hosting, domain registrations, and internet marketing products are some examples of sellers who would potentially lose a significant fraction of their sales through Paypal if they turn off the echeck option. A better solution for these sellers if they really don't want to accept echeck would be to set up an IPN script that automatically refunds any pending payments (since only actual echeck payments will ever be pending). This will allow those with an actual cash balance with Paypal to buy from them (with the payment being processed instantly) without the buyer needing to have a credit card attached to their account. A better solution is to simply sey up their IPN script so that it can handle the delay for echeck payments and will process the sale when Paypal clear the payment instead of always processing it immediately.
I have actually reported this problem with the echeck validation to Paypal and have received a number of replies from them as to how turning off echeck is supposed to work. The replies I have received contradict one anotherand basically indicate that Paypal does not want to recognise this as a bug in their system. They prefer to think of it as the seller having chosen to turn off the option to receive cash from Paypal in that situation even though Paypal also state that there is no option provided for being able to do that.
This article written by Stephen Chapman, Felgall Pty Ltd.