2021's Official Guide to Fighting PayPal Chargebacks

Table of Contents
- Does PayPal protect sellers against chargebacks?
- What is PayPal Chargeback fee?
- How to dispute a PayPal transaction?
- How does PayPal deal with chargebacks?
- What is PayPal's chargeback time limit?
- How do you fight PayPal chargebacks?
- What is the PayPal Seller Protection Program?
- Is a PayPal chargeback the same as a dispute?
- Conclusion
PayPal is now ubiquitous with online purchases. With that comes a lot of responsibility, and a lot of risk. Much like any merchant and payment processor, PayPal is also affected by the surge of PayPal chargebacks that is rolling over the retail industry.
Thousands of businesses utilize PayPal for online transactions—they’re a familiar and trusted name among e-commerce merchants, and there’s virtually no barrier to entry. PayPal offers convenience and security to merchants who want to facilitate card transactions but might not want to assume responsibility for processing payments themselves.
Does PayPal protect sellers against chargebacks?

What is PayPal Chargeback fee?
Sellers do not incur chargeback fees from PayPal on transactions that are protected under the PayPal Seller Protection Program or are funded with a credit or debit card. Transactions that do not meet this criteria are charged a fee regardless of the outcome of the case.
The fee is to cover PayPal’s involvement in the chargeback process and is $20 for all transactions in U.S. dollars, with varying rates for international transactions.
How to dispute a PayPal transaction?
How does PayPal deal with chargebacks?
- Buyer contacts their credit card issuing bank and requests a chargeback
- Issuing bank notifies PayPal’s merchant bank
- PayPal’s merchant bank notifies PayPal of the dispute and withdraws funds from PayPal
- PayPal notifies the seller of the dispute, and funds related to the chargeback are placed on hold
- Seller submits their evidence that the chargeback should be denied to the PayPal Resolution Center
- PayPal reviews the compelling evidence
- PayPal passes the compelling evidence to the buyer’s issuing bank
- Issuing bank reviews the compelling evidence and makes a decision on the chargeback case
- Issuing bank notifies the buyer and PayPal of their decision PayPal notifies the seller of the decision and updates the case status in the Resolution Center
What is PayPal's chargeback time limit?
How do you fight PayPal chargebacks?
While the chargeback process for a PayPal transaction can be slightly different, the essential components of a successful chargeback dispute—a timely response, compelling evidence, and a solid cover letter—are universal.
Merchants are advised to adapt their chargeback fighting strategies to account for the unique aspects of the PayPal chargeback process. The optimal approach for fighting PayPal chargebacks depends on the type of products or services being sold.
Here are the best compelling evidences to provide for each dispute scenario:
Physical Good Chargebacks
If your chargeback involves physical goods from a brick-and-mortar store, you'll want to focus on specifics like receipts, photos of the item (or the original item) and any correspondence (emails, delivery conformation, etc.). These items can include:
- Original item or auction description, including photos
- Transaction receipt with shipping and billing information
- Seller Protection verified information (if the transaction is eligible)
- Shipment tracking number, with time stamp
- Delivery receipt with a delivery address that matches the shipping address provided by the buyer (signature confirmation may be required for transactions over $750)
- Copies of any correspondence between the buyer and seller
- Proof of any refunds issued prior to the chargeback filing
- Proof of any replacement products shipped
- One-page cover letter explaining the seller’s reason for disputing the chargeback
Digital Good Chargebacks
Digital goods can be more difficult to argue, as Card-Not-Present merchants have less physical interaction with the cardholder. The same holds, however: any records, correspondence, and the item (if available):
- Original item or auction description, including photos
- Transaction receipt with billing information
- Copy of the seller’s return policy and terms & conditions
- Reports that prove that the product was downloaded or used by the buyer (this needs to include identifying information such as the buyer’s name, email, or IP address)
- For digital goods that are physically shipped, the delivery receipt with a delivery address that matches the shipping address provided by the buyer
- Copies of any correspondence between the buyer and seller
- Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
- Proof of any refunds issued prior to the chargeback filing
- One-page cover letter explaining the seller’s reason for disputing the chargeback
Digital Services Chargebacks
- Copy of the service agreement signed by the buyer and seller, outlining all the deliverables and timeline of the service to be provided
- Transaction receipt with billing information
- Copies of the service cancellation policy and terms of service
- Copies of any correspondence between the buyer and seller
- Service delivery acknowledgement signed by the buyer
- Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
- Proof of services rendered to the buyer (for digital marketing services and similar businesses)
- Proof of any refunds issued prior to the chargeback filing
- One-page cover letter explaining the seller’s reason for disputing the chargeback
Service Providers Chargebacks
- Copy of the service agreement signed by the buyer and seller, outlining all the deliverables and timeline of the service to be provided
- Transaction receipt with billing information
- Copies of any correspondence between the buyer and seller
- Service delivery acknowledgement signed by the buyer
- Copies of previous completed transactions that were not disputed (in cases where the chargeback is for a recurring billing transaction)
- Proof of any refunds issued prior to the chargeback filing
- Proof of any replacement services or products provided to the buyer
- One-page cover letter explaining the seller’s reason for disputing the chargeback
As with any other chargeback problem, it may be helpful for merchants who deal with a high volume of chargebacks to look for qualified, dependable chargeback experts to help them curate and present the evidence that will preserve their revenue, while showing them how to implement business improvements that will prevent chargebacks from happening in the first place.
What is the PayPal Seller Protection Program?
PayPal institutes several layers of security for their sellers, and an optional one is the Seller Protection for Merchants program. This program includes several security features for processing payments so that your business is compliant with all security standards.
More importantly, this program can help with dispute prevention. Instead of hitting a chargeback immediately (and incurring non-refundable penalties) you can choose to freeze the funds until PayPay conducts an investigation. In the meantime, you can handle and customer service channels that might be available to you.
Is a PayPal chargeback the same as a dispute?
PayPal disputes are a different mechanism than chargebacks. With a dispute, the purchaser can turn over their problems to PayPal. PayPal freezes the funds and calls for the customer and the merchant to negotiate the problem. If they are unable to negotiate the problem, then PayPal will step in with moderation to arbitrate the dispute.
During a PayPal chargeback, the buyer has their account frozen. With a dispute, however, they can make further purchases with their PayPal account.
While a PayPal chargeback may take at minimum 6 weeks to resolve, a dispute takes a maximum of 1 month. However, if the merchant and buyer cannot reach an agreement, PayPal offers an agreement that they see as in both parties' best interest.
Conclusion
Businesses that process e-commerce and other card-not-present transactions—including the over 17 million who use PayPal for payments—are quickly learning about the risks and realities of chargebacks.
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