PayPal Hikes Rates for Refunds and Chargebacks

June 17, 2010

PayPal announced this week on its blog a change in its refund and chargeback policy that effectively results in a price increase for online merchants that accept the alternative payment method. Eddie Davis, the company’s senior director of SMB Merchant Services, wrote that, while transaction fees will not increase, starting Aug. 10 PayPal will retain the $0.30 transaction fee when U.S. or Canadian sellers issue a refund. PayPal had previously credited merchants 100 percent of the fees when there was a refund. Additionally, starting Aug. 24 PayPal will double the fee it charges merchants for a chargeback from $10 to $20. “These are the first broad-based price increases from PayPal since 2004,” Davis said. “Despite the fact that the rest of the industry adjusts rates and pricing annually to adapt to increased costs, PayPal has managed to keep our costs extremely competitive. Our focus remains on offering a broad range of payment services within a simple cost structure, with none of the setup or hidden costs that others charge—such as gateway fees, monthly statement fees, Web access costs, address verification charges or downgrade costs.” The company also had an announcement concerning American Express acceptance. Merchants who use PayPal’s Website Payments Pro and Virtual Terminal merchants will be required to establish a direct contractual relationship with American Express. “As part of this new agreement, American Express pricing will change to be on par with their typical industry rates,” Davis said.