Getting to know chargebacks

Aug 30 2019 | PayPal editorial staff | 3 min read

A chargeback is when a customer asks their credit or debit card provider to reverse a charge. Resolving chargebacks takes time and patience, but by sticking with it, being responsive and providing full and proper documentation, you can avoid financial loss to your business.

Why are chargebacks filed?

Chargebacks happen for many reasons, but most commonly it’s because:
  • The customer didn’t receive the item.
  • The item the customer received is significantly different to how it was described.
  • The customer claims the purchase was unauthorised; made without their consent.
Chargebacks can be filed up to 180 days after the purchase date.
 

What happens when a customer files a chargeback against me?

When a chargeback has been filed, the credit or debit card provider will notify PayPal and request a response. We’ll then follow our chargeback process:
  1. We’ll email you about the chargeback. You’ll also see a notification in your PayPal account.
  2. The transaction may be placed on hold so that the funds are available and there’ll be no interruption to your cashflow if the customer needs to be refunded.
  3. We’ll ask you to provide information to help answer the chargeback within 10 days. The information we need vary depending on the reason for the dispute, but it could include proof of shipment, proof of service fulfilment, a transaction receipt, or communication between you and the buyer.
  4. We’ll then collate the evidence and submit it to the card provider who’ll use it to decide the outcome of the chargeback.
 

Do I have to fight chargebacks myself?

As long as you have a good reason to dispute it, we’ll help you build a case to take to the card provider. Our chargeback specialists can give you relevant transaction details and walk you through the steps, or you can access them directly in the Resolution Centre. Note: Ultimately, it’s the card issuer, not PayPal, who gets to decide the outcome of the dispute over a chargeback.
 

What should I do if I receive a chargeback?

  1. Log in to your PayPal business account and visit the Resolution Centre. This is where the details and status updates of chargebacks will be. It’s also where you’ll upload any required documentation. Make sure you respond within 10 days.
  2. Once you’ve submitted the required information, one of our chargeback specialists will review it and take the necessary actions on the claim for you. The goal is to recover funds from your customer’s card provider, but it’s still up to the card provider to make the final decision.
  3. If the card provider sides with you, the customer will be charged for the transaction and the money returned to your account. If they decide in favour of the customer, the transaction will be cancelled and a full refund will be issued.
  4. Regardless of the outcome, if the transaction is eligible for Seller Protection, you’ll keep the funds and any related chargeback fees will be waived.
 

Tips for dealing with chargebacks

  • It’s a good practice to get online tracking numbers for all your shipments. For high value items, you might also want to require a signed delivery confirmation. You can proactively add the tracking information to your transactions in your PayPal account and, if you do, we’ll usually be able to confirm delivery automatically. Proactively adding this information also saves you hunting it down if we ever need to ask for it.
  • Always review and respond to requests for information quickly. Sometimes you may need some time to find the required information or documents, but it must be submitted within 10 days.
  • Provide all the information you have that’s related to the transaction to build a strong case.
 

How long does it take to resolve a chargeback?

Our goal is to resolve disputes as quickly as possible, but the process can be long so patience is key. It typically takes us 30 days to process a chargeback, but the card provider can take 75 or more days to resolve the issue and make a final decision.
Chargebacks and disputes in review don’t limit your ability to continue selling and getting paid with PayPal.
 

 
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision

Frequently asked questions.

Chargebacks happen when your customer disagrees with a credit card charge and asks the credit card provider for a refund.

Customers initiate chargebacks for a variety of reasons:
  • An item is different from its description or is defective.
  • An item hasn’t been received.
  • A credit card charge isn’t recognised.
  • A payment is processed multiple times.
  • A payment is unauthorised.

You can learn how to avoid disputes and chargebacks on our website.
Item Not Received chargeback

Physical Item
When responding to an Item Not Received claim you can provide a tracking number as evidence that the customer received their item.
  • Be sure it can be verified online and shows delivery to the address the customer provided in the transaction details.
  • If the transaction is over $750 USD (or currency equivalent), signature confirmation must be included.
  • If the online tracking doesn't show delivery, you’ll need to upload a document from the postal company confirming delivery.
Service/Virtual Item
If the buyer says they didn’t receive the service or virtual item, you’ll need to provide evidence that it was delivered, used, provided, or the service was completed.
  • The evidence must be linked to the buyer (i.e. name, address, email address, PayPal transaction ID, or some other identifier that we can find in our transaction details - such as an invoice ID).
  • The evidence must clearly show the fulfilment of the transaction and that the customer either benefitted from the transaction or had the opportunity to do so in accordance with the terms and conditions of the service.
  • The evidence provided must come from sources or procedures already in place and must not be created ad hoc in response to the claim.
  • Provide any evidence or other relevant information that verifies the receipt of the item or completion of the service.

Unauthorised Chargeback

Physical Item
When responding to an unauthorised chargeback, provide a tracking number:
  • Be sure it can be verified online and shows delivery to the address the customer provided in the transaction details.
  • If the online tracking doesn't show delivery, you’ll need to upload a document from the postal company confirming delivery.
Service/Virtual Item
When responding to your chargeback, provide evidence that the virtual item was delivered, used, provided, or the service was completed.
  • The evidence must be linked to the buyer (i.e. name, address, email address, PayPal transaction ID, or some other identifier that we can find in our transaction details - such as an invoice ID).
  • The evidence must clearly show the fulfilment of the transaction and that the customer either benefitted from the transaction or had the opportunity to do so in accordance with the terms and conditions of the service.
  • The evidence provided must come from sources or procedures already in place and must not be created ad hoc in response to the claim.
  • Provide any evidence or other relevant information that verifies the receipt of the item or completion of the service.

Merchandise Chargeback

When responding to a merchandise chargeback provide the following information:
  • A short (one or two sentences) overview of your business model and process.  
  • A response based on the chargeback reason, describing why the chargeback is unwarranted and a refund isn't due. Provide details of the terms and conditions the buyer agreed to when making the purchase that apply to this situation.
  • Any documentation (including pictures) that would be helpful when determining the outcome of the claim. Please don't send stock photos.
  • Any correspondence you had with the buyer in question as they attempted to resolve the issue directly with you.

PayPal Seller Protection is a form of protection that we provide for sellers with a PayPal account. It's available for eligible payments made through eBay and outside of eBay which involve buyers purchasing through PayPal accounts in any country. If your buyer files a reversal, claim or chargeback against you due to unauthorised transactions or for items not received, PayPal will reimburse the full amount of your eligible transaction and waive the chargeback fee if applicable.

PayPal Seller Protection doesn’t require additional signup. As long as you meet the eligibility criteria, you will qualify for Seller Protection automatically. To avail of Seller Protection, you must meet the eligibility requirements stated in our User Agreement.

For full details about the eligibility requirements and scope of PayPal Seller Protection, click Legal at the bottom of any PayPal page, then click User Agreement for PayPal Service.

PayPal Seller Protection is provided to our sellers with no additional signup or cost. Your eligible transactions are safeguarded with Seller Protection when your buyer raises claims, chargebacks or reversals for the following problems:

  • Unauthorised transaction: Buyer claims that they didn’t authorise the purchase, they didn’t make the purchase, or they were victims of identity or credit card theft.
  • Item not received: Buyer claims to have never received the goods they purchased.
For an eligible transaction, we’ll reimburse you the full amount of the eligible payment and waive the chargeback fee if applicable. Please note that claims or chargebacks for items significantly different from your description aren’t eligible for Seller Protection.

To qualify for Seller Protection in Australia, your transaction must meet all the eligibility requirements.

When a dispute, claim or chargeback is open, the funds are held in the seller's account and are not available for use. They cannot be withdrawn and will be considered "disputed" until the dispute, claim or chargeback is resolved. This ensures the funds are available if a refund is needed.

The seller can use the held funds to issue a refund anytime during the dispute by clicking Refund on the Transaction Details page.

Once the dispute, claim or chargeback is resolved, the remaining funds will be released if found in the seller's favour. If the seller is unsuccesful in challenging the dispute, the funds will be refunded to the buyer.

You can view the current status of an open dispute or claim in the Resolution Centre.

The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.