PayPal holds immense brand authority when it comes to sending & receiving payments online. This is primarily due to the payment processor’s emphasis on user security & protection plans. Our topic of interest today is ‘ how to chargeback on PayPal ’, or put simply getting a refund for your purchases. In the sections that follow we discuss ‘what a chargeback is?’ and ‘how to do a chargeback on PayPal?
What is a Chargeback?
Occasionally online purchases don’t go as planned and hence cause a bit of disarray in the process. The PayPal defines it as “…when a customer files a chargeback with their credit card issuer, it means that they’re disputing a charge and asking the card issuer for a refund.”
Buyers can simply demand refunds for transactions and inform their credit card company to cancel/refund the payment. These refunds are termed “chargebacks” in banking terms. In case of the chargeback, PayPal will freeze the funds in the seller account. There are several reasons that can lead to a chargeback:
- The buyer does not receive the product(s)
- A buyer receives damaged or defective item(s)
- Buyer doesn’t recognize/remember the credit card payment
- The buyer receives gets the charge more than once for a transaction
- When a buyer did not authorize the payment
When chargeback is file the credit card company is in charge of the entire process. The credit card company takes the decision after investigation and informs the buyer. In case of a chargeback on PayPal, the seller incurs a chargeback fee but this fee can be waived (few cases) off if the seller is subscribed to the Seller Protection Policy.
A better way sellers can manage chargeback on PayPal is using breakthrough ecommerce assurance & order verification app. These apps charge a meager amount to guarantee verification of orders and a 100% refund guarantee in case of chargebacks.
How a PayPal Chargeback Works
Generally when a buyer requests chargeback, the service immediately contacts the buyer’s credit card issuer. PayPal does not hold any authority during the chargeback process though.
- The process usually begins with the buyer requesting a chargeback from their credit card issuer. This step is usually very simple and takes no more than a phone call or email with complete evidence of the transaction.
- The credit card issuer then informs PayPal’s official merchant bank and withdraws the funds from their account.
- PayPal then puts the chargeback funds on hold and deems them untouchable.
- Both buyer & seller are then notified through email. PayPal will request for all information that can help resolve the chargeback.
When dealing with chargebacks, remember that:
- Buyers are eligible for chargebacks on PayPal transactions for 120 days or more after placing the order.
- Sellers who receive chargebacks have a 10 day time period to respond to the dispute.
- Chargebacks on PayPal usually take a matter of weeks, but can take up to 75 day or more depending on the case.
How can Sellers manage chargeback on PayPal
When experiencing chargeback on PayPal, sellers are the most unfortunate parties. Usually, PayPal sides with the buyer providing them a complete refund while the seller is left hanging. You can always get PayPal’s seller protection, but the feature comes with its own rules & restrictions leading sellers nowhere.
This brings us to the perfect solution for sellers who experience chargebacks frequently. Signifyd, is a leading solution available on the Shopify app store designed specifically to support sellers in case of chargebacks. Signifyd’s eCommerce assurance features allow sellers to mitigate against growing eCommerce challenges.
Signifyd provides sellers some brilliant features that:
- Automatically assess order reliability & validity
Signifyd automatically assess all transactions and verifies if orders are to be completed or not. All orders are secure with chargeback protection to ensure the seller does not experience massive losses.
- Provide auto fraud prevention
The zero fraud prevention feature guarantees all your transactions. Signifyd app offers a brilliant verification system that ensures no fraudulent transactions can go through. In case of frauds, refund payments are made within 48 hours to sellers.
- Provide fraud liability insurance
The liability insurance as mentioned above covers 100% of refund & chargeback costs. In case a fraud transaction is ever accepted, Signifyd covers the cost of the sale and the chargeback fees.
- Automatic Order Approval/Rejection
The leading edge Signifyd console lets you manage orders automatically removing the hectic tasks. Signifyd will automatically send verified orders for processing while rejected orders are left out.
Signifyd is currently has a 5 Star rating on the Shopify store and is available with a 14 day free trial. Currently, Signifyd offers three subscription plans:
- On Demand
- Complete, and
In case you ever face issues with Signifyd app, a great Shopify support center and a massive community are always there to help you out.
How Do I Prevent PayPal Chargeback Scams?
The interesting fact about PayPal is that it experiences scams from both buyers and sellers. That’s why the service maintains a strict and transparent process to mitigate chargebacks and disputes.
One of the most common kind of scam on PayPal is a “Friendly Fraud”. This occurs when a buyer creates a dispute on PayPal and then claims a chargeback from the card issuing bank. The buyer also receives the product(s), and the seller is left scammed and bears the loss.
Among other types of scams that a buyer can commit include:
- Claims that products were not delivered, when actually they have.
- When a buyer claims products were defective, but actually they were fine.
- Disputing the quality of the products or services.
- Claims that the transaction was not authorized by them.
The absence of proper eCommerce chargeback laws are the primary reason many of these buyer scams are a success. The developments in eCommerce have led to great ease but also encouraged scams from different parts of the world.
You can take several steps to ensure your shop is not hit by scams:
- Never ship to a freight company, always ship to the buyer’s home address
- Verify buyer IP Address. Then verify if billing & shipping address comply with, the IP and location.
- Use a customer & order verification tool that identifies fraudulent buyers. E.g. No Fraud app on Shopify
- Be sure your store complies with all FTC Regulations
- Create accurate and easy product descriptions, so there is no objection later from buyers
- Be very clear about product quality & features, don’t forget to mention anything
- Be in contact with the customer 24/7 over phone, email or WhatsApp
- Publish your contact information on the webstore
- Always consider having PayPal Seller Protection – it may not be perfect but still a great way to protect against scams
- Always check the email address that sent you the PayPal chargeback notice. Sometimes scammers create fake PayPal related emails to send out scams. (see example below)
Differences between Chargebacks and PayPal Disputes
Since we already know what a chargeback is, let’s quickly overview what a dispute is.
In case the buyer & seller fail to agree terms, the buyer can launch a dispute through their dashboard. PayPal freezes the funds till both parties reach a resolution. The buyer & seller are required to negotiate from this point on, in case the two parties fail to agree PP moderation gets involved to resolve the issue and this is then called an “escalated claim”.
The first prominent difference in the two processes are the parties involved. Chargebacks on PayPal involve the buyer and their credit card issuer, while in case of a dispute PP administration keeps the issue in house to get it resolved between buyer & seller.
In case of chargebacks on PayPal, the buyer cannot conduct transactions and their account goes into “suspended” status. In case of a dispute only the amount for that disputed transaction remains on hold, the buyer’s account remains active for other transactions.
Thirdly, in case of chargebacks the credit card company holds authority and makes the decision, where as in case of a dispute first buyer & seller can reach an agreement without escalation. In case the two parties don’t agree, PP moderators steps in and offers a resolution best for both.
A fourth difference is between the time frames of the two processes. A chargeback can take upto a minimum of 6 weeks to arrive at a result. A dispute takes no longer than a month, with both buyer and seller required to act quickly.
Other Types of Objection on PayPal
The objection means any unwanted event happened in PayPal transaction. The Buyer, seller or even the bank could initiate the objection.
Generally, three types of objection occurred on PayPal,
Buyer initiates the dispute when the problem with the transaction occurred.
Reasons for Dispute
The dispute can occur for two reasons:
- Item Not Received (INR): In this case, buyer claims of not receiving the order after the payment.
- Significantly Not As Described (SNAD): In this case, buyer claims the product is not up to the expectation as described by the seller or product is different.
The complaint is through PayPal’s resolution center however, PayPal would not involve in the scene of dispute. Seller will receive an email where he can directly contact the customer to resolve the dispute.
Claim is an advanced version of dispute when the disputes is not resolved in 20 days and buyer escalates the issue to PayPal.
Another reason for the claim is ‘Unauthorized Transaction’. It means the buyer’s account may have been compromised or hacked and someone made a purchase from the account without their permission.
In the claim, the seller has 10 days to respond. If the seller does not resolve it in the given time, PayPal will close the claim in favor of the buyer.
If sellers respond within 10 days, PayPal will evaluate the claim and resolves the case within 30 days. However, in complex cases, it could take a long time.
It happens when the buyer or the bank request to refund the transaction made by the bank account.
The Reasons for Bank Reversal:
Bank reversal usually happens when someone uses the buyer’s account information without their consent. The situation in which bank reversal happens,
- The buyer’s bank account was used to purchase an item without their permission.
- Buyer identity unknown transaction.
- When the purchased item did not arrive.
- The buyer was charged twice for the same item.
How to Chargeback on PayPal – Frequently Asked Questions
How do I get my money back from PayPal if scammed?
The question ‘how to get money back from PayPal if scammed’ is relevant to both buyers and sellers.
For a buyer, the process is easy and can be done by reporting a dispute with PayPal using their dashboard. Decisions usually take 5 to 10 days and are mostly ruled in favor of the buyer in case of the dispute. PayPal will automatically return the disputed amount to the buyer after an investigation.
For sellers, life is hard with PayPal. Sellers usually don’t get decisions ruled in their favor even with proper evidence of a scam. PayPal is not an ideal method to use without its Seller Protection service, but even in the case of the protection, some cases are ruled in buyer’s favor. As a recommendation, sellers should keep all evidence of the transaction and sale, keep track of shipping and delivery, and have a solicitor just in case a large amount is involved. There are no types of PayPal chargeback fees.
How do I link a debit or credit card to my PayPal account?
You can link your debit/credit card to your account as follows:
- Sign into your account
- Click the Wallet button on top of your dashboard page
- Click + Link a card or Bank
- Next, click Link a Debit or Credit Card
- Fill the provided boxes with your card details
What is the PayPal chargeback time limit?
A buyer can file a chargeback 120 days or more after making the purchase. A Seller has 10 days to respond to a chargeback. Usually, chargebacks take up to a few weeks to process. Depending on the complexity of the case some chargebacks can take 75 days or more to process.
Can I cancel a payment on PayPal?
Recurring payments are canceled through your dashboard, but, one time payments cannot be canceled and must go through the dispute process or chargeback.
How to chargeback on PayPal debit card?
You can get chargebacks on PayPal debit card like any other credit/debit card by demanding a refund from the bank. The amount should take 3-5 days to come back to your account.
How does PayPal Work for Sellers
PayPal was a payment gateway primarily designed to help buyers make secure payments for online purchases. The service has never really been an ideal method for sellers. This is largely due to the lack of protections available for sellers. PayPal does, however, accept payments in 25 different currencies from 200+ countries around the world.
Types of Seller Accounts
PayPal allows sellers to receive and send out payments through all of its 3 account types namely basic, premium, and business.
A basic account allows receiving payments but only allows withdrawals of $500 per month. When a bank account is connected to the PayPal account, it is then classified premium and removes the withdrawal limit. A business account is more or less the same as a premium account, it provides the facility for multiple users to access the account.
PayPal Seller Account Fees
Sellers with registered businesses on PayPal also pay a 2.9% fee + $0.30 for every sale transaction. E-store owners who are not using Shopify or an eCommerce platform can embed PayPal for $5 a month. E-Store owners can also make use of the PayPal Payments Pro service which basically allows sellers to accept credit card payment over the phone.
When a buyer pays for purchases payments can take upto 5 days to appear in the seller’s account. Usually, if the payment is made by a buyer account linked to a bank, card, or current PayPal balance it is immediately sent to the seller, who can then dispatch the goods. In case of an eCheck payment, the payments usually clear between 5 and 7 days.
PayPal offers sellers protection from fraudulent buyers through the Seller Protection feature. The process is quite simple:
- Sellers only ship items to a PayPal authorized address for the buyers
- PayPal registers authorized buyer addresses beforehand
- Authorized addresses are verified through bank account or credit card information
- Sellers are recommended to provide a tracking number as poof of delivery
In adding to the points as mentioned earlier, there are several other conditions to meet to qualify for a Seller Protection payment. The first of these is that if an order is above $250, sellers need to provide a signature for authentication. This is followed by the principle that goods must be shipped within 7 days of the order. Once all these terms have been met, PayPal guarantees payment for shipment and the product(s).
In a Nutshell
PayPal remains one of the most popular payment processors for online transactions. Buyers unaware about refunds and disputes will definitely love learning about making chargebacks on PayPal transactions. Remember to share my article and leave your feedback to improve my content accordingly. Subscribe to our mailing lists to get the latest Ecommerce tips, hack and strategies for a prosperous business experience.