Paypal receivables account has no overdraft protection and not overdraft allowance. If a withdrawl over the value of the account comes in, it is denied.
Connect that account to paypal.
Next, in the Paypal receivables account, setup an external transfer from the receivables account to the main account. You will have to validate the ownership of the second account usually by posting two small transactions that were auto posted to the account as part of the validation process. This takes a couple days. Once that is done, you can transfer money from receivables account to main account but not the other way.
Transfer money out of paypal to the receivables account, transfer money from receivables to main. Use a credit card to spend money with paypal.
You can set up two way transfers if you need to put cash into that account for transactions and you still get a similar level or separation, I just prefer to use a CC instead because they'll help you out if you want to dispute or reverse a transaction and paypal may not.
Note that this may not work everywhere in the world. For example, in Australia, the legacy direct debit system will happily put an account with no overdraft into negative balance.
I’m not sure if the modern replacement (PayTo) has the same behaviour. In any case, legacy direct debits will probably stick around for years.
The best option is to simply avoid PayPal.
Unfortunately certain vendors only accept Paypal. For example, I like to watch billiards, and Accu-Stats (one of the largest PPV billiards sites) only accepts Paypal. So, unfortunately, my choice is either to bite the bullet and use Paypal or be prevented from watching the events I'm interested in.
My bank (BoA) allows me to have multiple checking accounts so long as you satisfy the initial deposit requirement, and maintain sufficient balances in other linked accounts, so this looks like a good way forward. I think I'll switch other apps to use this new receivables account to contain their potential blast radius.
It happens every 10-18 months, enough that I assume there is a substantial amount of money being produced by charging a late fee and interest and people not noticing. They never put it back either, have to call and spend a couple hours with them.
My lease favorite bank.
but I definitely have the same question, I always deposit anything sent to me via paypal, venmo, whatever right away so there's zero balance.
good luck telling a bank to un-authorize someone from being able to deposit or remove money from your account though, I had to call them up and they didn't even seem to know how to do it.
somehow it isn't just a checkbox, it seems to me like revoking that permission should be vastly easier than providing it...