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 item did not arrive.
- The item was significantly different than advertised.
- Their credit card was used without their permission to purchase the item fraudulently.
Charge backs 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.
PayPal dispute and the chargeback
A PayPal dispute is the first step in the PayPal buyer complaint process. During the dispute phase, buyers and sellers “meet” in the PayPal Resolution Centre to try to come up with a mutually acceptable solution.
A PayPal claim is the second step in the PayPal buyer complaint process. If a buyer and seller cannot resolve their dispute on their own, the buyer may escalate the dispute to a claim. PayPal will then provide a final decision.
Note that the credit card issuer decides who wins the chargeback, and not PayPal.
Ways to avoid chargeback
If you are seller than note the following things to avoid chargeback at all costs
- Always ship to the buyer’s address listed on the Transaction Details page and retain proof of delivery that can be tracked online.
- Describe the item you are selling accurately, and in as much detail as possible. Include pictures, measurements, and other relevant details.
- Also get to know your customers, and respond promptly to their requests. Save all your customer and transaction-related emails and correspondence.
- Publish your return policy in clear and simple terms, and include it in your correspondence with customers. Note that 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.
- You’ll find more helpful tips on safer selling here.
Also do note that some chargebacks occur long after a payment has been received. This is because certain laws and credit card issuer policies allow buyers to file chargebacks weeks or months after the original transaction took place. If a buyer waits and files later, you may encounter a temporary hold on funds in your PayPal account, relating to a transaction from long ago.
PayPal lets you know a chargeback has been filed against you by emailing you when the buyer’s credit card company will notify PayPal.
You can then log in to your PayPal account and go to the Resolution Centre to monitor the status of the case, and potentially provide information to help resolve the matter. PayPal may also help you fight against the buyer’s credit card company.
Certain laws and credit card issuer policies allow buyers to file chargebacks weeks or months after the original transaction took place. If a buyer waits and files later, you may encounter a temporary hold on funds in your PayPal account, relating to a transaction from long ago.
So it means a temporary hold is placed on the funds in question until the matter has been resolved. This means you cannot withdraw or spend these funds until the dispute has come to an end.
If the dispute is found in your favour, the hold will be immediately released, and you’ll have full access to your funds. If the dispute is not found in your favour, the funds will be removed from your account and credited back to the buyer.
Also note that it may take your buyer’s credit card company up to 75 days to resolve a chargeback and come to a final decision.
PayPal may help you winning a chargeback
You should provide following information to increase your chances of winning a chargeback dispute
- Proof of delivery, such as postage or online tracking numbers.
- Copies of the original item or auction description, including photos.
- Proof that the buyer was already refunded.
- Proof that the buyer was given a replacement product.
- Any buyer correspondence or feedback.
- Any agreements signed or accepted by the buyer at the time of purchase.
- Any return policy information that was communicated to the buyer.
PayPal may protect you against any future claim, chargeback, or bank reversal the buyer files in relation to that particular transaction. To have protection, you must honour the agreements you made with the buyer during the dispute resolution process. But PayPal won’t be able to offer protection if the claim has not been resolved by the time the chargeback is received. You can visit the paypal site for more information.