They only protect you if the seller has money in his account. My Friend bought a video card that was never sent. Ebay said that the seller did not have money in his account so there was nothing they could do. He was out $500 with no recourse.

Exactly this. Had to go through this situation. PayPal said they'll flag the account, but these accounts are already abandoned once the money is withdrawn.

What year was this?

Why wasn't a charge back an option?

In addition to my other comment. You want to pay by credit card since it has fraud protection. Never use PayPal credits or bank transfers or debit cards. Debit do have some protection, but usually have shorter time frame on when you need to report.

If you're on eBay, you don't have any choice in the matter, it's PayPal or nothing.

Charging back a PayPal transaction also basically ensures you'll get banned from the service (and by extension: eBay)

Well, that's kinda fine by me. If I'm out $1000 from a fraudulent lens purchase on eBay, and they/Paypal won't refund, then I'm fine not doing business with them anymore and recovering my $1k from credit charge back.

You can pay with your credit card via PayPal. It defaults to credits, then your bank, but you can elect to pay with CC just fine

It's still through your PayPal account though.

It's not credit card -> merchant, but rather credit card -> your PayPal account -> merchant's PayPal account

Is this an eBay thing? In general, PayPal doesn't require buyers to have an account to pay by credit card.

Edit: What I mean to say is that AFAIK, paying by CC through PayPal is separate from your PayPal balance.

Yes, that's how most people use PayPal I'd imagine, certainly I never keep any money there.

The point being made is that your CC transaction is still with PayPal, so if you chargeback they might ban you from the service.