If I close my bank account, and then an online merchant tries to get funds, can they?

no but you will have a negative balance in your paypal account…

The bank I worked for would pay the on-line merchant even if your account was closed, as long as it wasn’t closed too long. It would put your account in the negative and charge mega-bucks in fees. We could never figure out how long the account needed to be closed in order for that not to happen. The bank cannot give out your address.

In most cases they would not pay the item if the checking or savings account is closed. There can be exceptions to that rule….lets say you close your account and a item is presented that day or before midnight of the day you closed your account the item can cause the account to stay open and then yes you would be hit with overdraft fees.

You signed an authorization contract with Pay-pal. Pay pals contract with you will authorize them to “re-open” your account and put you into the negative. You will have to contact Pay-pal and revoke your authorization. Then, if they charge your account you can sign an affidavit at the bank swearing you revoked your authorization and when. The bank will refund the money contingently. Depending on your bank and/or branch manager, your fees for Over Draft may be refunded too.
To avoid all this hassle, just contact Pay-Pal and tell them of your intent.