Chargeback Guide - Info and Resources from PayPal Canada
Your Guide to Chargebacks
What's a Chargeback?
A chargeback, also known as a reversal, is when a buyer asks their credit card issuer to reverse a transaction after it has been completed. It is available only to users who make a payment funded by their credit card.
There are three main reasons a buyer will do this:
- The purchased item never arrived.
- The item was significantly different than advertised.
- Their credit card was used without their permission to purchase the item fraudulently.
Chargebacks are initiated and handled by the buyer's credit card issuer - not by PayPal - and therefore will follow that company's regulations and timeframes. That said, PayPal often plays a role in resolving chargeback disputes.
Here's a quick overview of the chargeback process:
- The buyer requests a chargeback from their credit card company.
- The credit card company notifies PayPal's merchant bank and debits the funds from PayPal.
- PayPal places a hold on the seller's funds related to the chargeback.
- PayPal immediately notifies the seller via email and requests information that could help to dispute the chargeback.
PayPal is here to help sellers resolve - and minimize - chargebacks. Learn what happens after you've been notified of a chargeback.
If you've been notified of a chargeback, we'll help you sort it out.
Our team of chargeback specialists can help you build a case to take to the credit card company - assuming you have good reason to dispute it. We'll provide you with all the relevant transaction details and walk you through the steps for submitting information to the credit card company.
What to do if you receive a chargeback:
- Log in to your PayPal account.
- Go to the Resolution Centre.
- Respond to the chargeback notice or (check on the status of an existing one).
- Provide PayPal with the information relating to the chargeback, including all transaction records (such as proof of shipment).
- The PayPal chargeback specialist will then dispute the chargeback on your behalf and try to recover your funds from the buyer's credit card company.
- If the credit card company decides in your favour, the buyer will be charged for the transaction and you'll get your money back.
- If the decision is in favour of the buyer, the transaction will be cancelled and the buyer will receive a full refund.
It's PayPal's mission to help you resolve the dispute as quickly and painlessly as possible, but the process can be lengthy, so you'll need to be patient. It typically takes 30 days for PayPal to dispute the chargeback, and it may take your buyer's credit card company up to 75 days to resolve a chargeback and come to a final decision.
We can also help you reduce the risk of receiving chargebacks in the future.
Chargeback Coverage with PayPal Dispute Resolution
PayPal may protect you against any future claim, chargeback or bank reversal the buyer files in relation to that particular transaction. To get the protection, you must honour the agreements you made with the buyer during the dispute resolution process. But we won't be able to offer protection if the claim has not been resolved by the time the chargeback is received.
Any time credit card payments are involved in a transaction, there's always the risk of a chargeback. Sometimes buyers are not satisfied with their purchases, or their order never arrives, or their credit card has been used fraudulently.
Many sellers factor potential chargeback losses into the cost of doing business. That said, there are some steps you can take to reduce your risk. It's wise to keep buyers well informed, maintain good records, and pay attention to our Communication Tips, including the following:
Provide Contact Information
Buyers may not resort to a chargeback if they can talk to you about the issue first. Provide an email address or phone number, or even call buyers in advance when you're selling higher priced items.
No one likes to wait, so do your best to respond quickly and professionally to all reasonable buyer inquiries.
Suggest Dispute Resolution
If a customer tells you that they intend to file a chargeback with their credit card company, ask them to open a dispute in the PayPal Resolution Centre instead. This will give you and your buyer the chance to work things out on your own.
Provide a Clear Return Policy
Make sure your return and refund policies are easy to find and understand on your website and all your auction listings.
Please note: some laws and credit card issuer policies stipulate that buyers have chargeback rights for merchandise that is not delivered or is defective, even if your policy indicates that all sales are final and that you do not allow returns.
Following these guidelines will help you reduce your risk. Equally important, however, is being aware of chargeback fraud.
Prevent the Top 3 Chargeback Claims
- The item never arrived:Give your buyers realistic delivery dates so they don't prematurely file a chargeback. Ship packages with tracking numbers and signature confirmation to provide proof of receipt. (Postal insurance is also helpful - you can be reimbursed if the package is lost.)
- The item did not meet the buyer's expectations:Make sure you describe items as accurately as possible. Provide clear details of what you are selling to minimize confusion.
- The item was damaged:Credit card companies may allow chargebacks for damaged or defective merchandise, even if your return policy states that all sales are final. Purchase postal insurance when you send the item to help reduce potential losses.
While most buyers file chargebacks for reasons they believe are legitimate, there are criminals out there who try to take advantage of the system.
The claims most often exploited for chargeback fraud are:
- A scammer makes a legitimate purchase - but claims the transaction was not authorized.
- A criminal pretends an item never arrived, or lies and says it arrived significantly different than it was described.
Knowing about chargeback fraud helps prevent you from becoming a victim. It is also a good idea to familiarize yourself with the ways to reduce the risk of legitimate chargebacks.
Learn more about avoiding and dealing with all types of fraud.