I understand that reversing charges can be used for petty fraud- but bitcoin is also vulnerable to fraud, is it not? The difference is who is the victim. With paypal, merchants have to worry about petty fraud, sure. What I'm seeing with bitcoin is the potential for the consumers to be scammed instead. At the same time, Its that much harder to deal with these scams- I'm sure fighting paypal on a reversed charge is an unpleasant, uphill battle, but if I send say, send 3k USD worth of bitcoins to someone for a custom watch that never manifests I have no recourse at all. The problem isn't with PayPal siding with customers, It's in people out to make a dishonest quick buck.
Technically, giving someone $3000 in Bitcoins isn't different from sending someone them via Western Union - there are still traces for law enforcement to pursue, but more often than not, when your $3000 via Western Union has departed, it is departed as surely as if it was Bitcoin.
Also, assuming you take care and do due diligence (as you would probably do before forking over a large sum in plain dead tree USD cash) the scammer has to invest a lot of effort to build up a profile to deceive you (hard), while a reverse-transaction scam requires the scammer either to have many fake-ID paypal accounts (easy) or do the scams relatively rare (easy).
Basically, think of bitcoins as cash that can be forked over via internet.
Doing something with bitcoins that you would not have done with dead tree dollars is not advisable.
And I am somewhat dubious as to where would losses go if someone scams a person for 3000$ via paypal and those 3000$ are already out of scammer's account by the time fraud complaints are filed (there are ways to rapidly cash paypal out without exposing yourself to LEAs. They cost dearly, but the scammer is likely ready to pay a significant portion of his illegally earned money to pull them out of paypal ASAP)
Would Paypal still reverse it and suck up the damage ?
I've never paid a fee for my credit card. I've always paid the balance in full each month. Maybe I've lucked out.
It might be dependent on how your bank works, but where I live online transactions, even with "propper" credit cards (not debit ones) and not resulting in any overdraft shenanigans, are still subject to a special "card not present risk fee".
That's the point- Bitcoins really don't offer any security against scammers. Paypal has flaws, but bitcoins don't offer leaps and bounds of improvements. Also just noting that due diligence is hard in a younger community like bitcoin merchants. Easy to get into, easy to run with a profit.