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Paypal Fees for Refunds


Paypal Fees for Refunds

According to the new Paypal user agreement effective May 7th, paypal will no longer credit you back the fees when a customer gets full refund or even cancels an eBay order before the item is shipped.  


Does anyone have any suggestions on how to handle this financially?  I sell for a business and this is going to throw or net deposits off on a regular basis.



New Community Member

Paypal not refunding original fees on full refunds ... Can destroy businesses

My wife and I are using Paypal in USA for over 10 years. Our combined Paypal accounts earn $400,000+ in sales annually, and we pay monthly for Payflow Pro. This new policy as of May 7th, 2019 where as Paypal will still take all fees (even if we refund an order 100%) - this is setting our business up for great financial losses!

For example, our payflow settings were to "review" and NOT auto accept orders over $500 that were "unusual." Today, Paypal approved order for almost $800 without using the review flag that I had set! My third party fraud filter Subuno flagged it as fraud (as the order was placed in Ohio and being Shipped to New York - over night shipping).

Now, if Paypal still takes fees on this fruad refund, we loose $24+ dollars and we are in the negative for this one order. This fraudulent person can do this over and over everyday until we go bankrupt (knowing that paypal payflow rules won't even work properly) this is very scary, misleading and irritating!

To be honest, I would RATHER Paypal charge us to 4-5% plus $0.30 for a good sale and return all fees on refunds. I would be OKAY with paying extra for processing knowing that I can cancel fraud or customer cancellation requests without having to worry about paying fees for orders that I didn't even keep the money for. If Paypal does implement this, and DOES NOT return transaction fees on refunds, we will have no choice but to take our annual business of $400K to Square.

Perhaps Paypal should allow customers to choose a billing subscription fee type: (i.e. 4-5% with NO fees taken on refunds ... OR a different plan with 2.9% but non-refundable fees on refunds). I hope someone at Paypal forwards this post to a supervisor. Please submit this as both a complaint AND a suggestion. We are very upset and nervous about this new policy as fraudulent competitors can drive each other out of business! 


New PayPal terms & conditions concerning refunds

According to the June 6 2019 update, if a merchant refunds a customer's purchase, PayPal will no longer refund the fees taken for that transaction. This seems rather unreasonable but just in case I have misunderstood the situation, I would like to suggest a test case:

A customer places an order for an item but has inadvertently selected the wrong item. He still wishes to make a purchase but the item he wants costs less than the item he ordered in error. In order to avoid raising credits and issuing a partial refund, the simplest method is to refund his original purchase and let him place an order for the correct item. Am I to understand that if I do that, I will now be penalized by PayPal by having to absorb transaction fees for a sum never physically received?

I'm sorry if I worded that a little harshly but those fees will only add to the burden of an ever-lower bottom line.



We have done a ton of business through PayPal since 2007, often paying $1000 USD per month in seller fees, in addition to using PayPal to purchase the majority of our inventory.


Unfortunately I will not stand for this new fee structure. No other payment provider does this. It's terrible for the sellers and buyers who have supported your service. This is 2019, online returns and cancellations are expected. Disgusted with you and ready to move on. 

New Community Member


I agree. I came here to confirm if this is true. I regularly take security deposits as part of a bigger transaction. Trust me, PayPal gets paid well. When I refund the portion that is a security deposit, I will now have to eat a $10 charge. No way. PayPal has lost my business until this is reversed. 


Rip Off Notice!! PayPal to no longer refund the 2.9% merchant fee on refund

Paypal sent out a notice of policy change today.  It said that if you get paid by paypal and your customer returns the goods and asks for a refund that any fees paid to paypal will not be refunded to the seller.  I was dumbfounded by this.  I use Paypal Here with a credit card reader at my shop where I sell $3000 bicycles.  I thought I must be reading this wrong.  So if my customer asks for a refund, Paypal is keeping the 2.9% from the transaction?  Here is what I emailed support and their reply:  CRIMINAL.


My message:   'I just received a Notice of Policy Update. One of the updates states - 
>"We’re changing how we treat refunds. If you refund (partially or fully) a transaction to a buyer or a donation to a donor, there are no fees to make the refund, but the fees you originally paid as the seller will not be returned to you."
>Does this mean that if a customer purchases a $3,000 item and then returns it for a refund that I will not recover the 2.9% merchant account fee paid to paypal? Please advise.


Paypals response:  " Thank you for contacting PayPal Customer Support. My name is Brittany and I am happy to assist you. That is correct. If an item is returned it would no longer cancel out the fee from the original transaction. This change goes into effect May 7th. Have a great day."

I am outta here.  F paypal!
Esteemed Advisor

Re: Rip Off Notice!! PayPal to no longer refund the 2.9% merchant fee on refund



Bye then.

Advice is voluntarily given.
Kudos / Solution appreciated if I helped you.

Re: Rip Off Notice!! PayPal to no longer refund the 2.9% merchant fee on refund

Can an Admin / Moderator confirm if this policy applies to UK accounts as well please?


If so, can they also confirm that giving customers the "middle finger" by saying that we're free to close our accounts, will also not force us to stop trading on the eBay platform, that still seems to require payment through PayPal?


Re: Rip Off Notice!! PayPal to no longer refund the 2.9% merchant fee on refund

I agree...this is a complete ripoff and absolutely predatory.  The "In line with industry practice" is especially precious.  Because other companies **bleep** you, it's acceptable for us to **bleep** you.  F.  Paypal.  I know Stripe has the same B.S. practice, so who's everybody using for credit card processing that doesn't have a "**bleep** our customer" policy?



New Community Member

Re: Rip Off Notice!! PayPal to no longer refund the 2.9% merchant fee on refund

Yes, this is complete, utter nonsense. Standard industry practice is complete B.S. I've operated a small business for nearly 17 years, and have accepted PayPal the entire time. I will now inform ALL 10,000 of my customer base (mostly recurring customers) that I will either need to A) Stop accepting PayPal (most have credit cards anyway) or B) They will NOT be refunded the PayPal fee if they make a make mistake or the order needs to be returned. This will result in less business for PayPal if A) I don't even offer as an option any more B) Customers laugh at the notion of any product return getting whacked between 2.9% to 4.5% by PayPal. Yes, about 4.5% is what the fee is for my International customers, which is about 40% of my overall business.


PayPal might think small businesses like mine should be able to absorb and and not pass along the butt reaming to their customers? NO way. Bad for business, and certainly not tenable for a small business that is already forced to compete with the likes of Amazon free returns and free shipping.


An NO, PayPal... this ISN'T industry norm. I also accept Visa, MC, Discover, and Amex as Payment options, and none of them charge these fees beyond the per transaction fee that is a whopping .05.


Whoever the genius is at PayPal that decided to institute this policy needs to have their head checked.