Finally, Paypal Refunds Become Expensive!

Now Paypal™ charges you a fee even for refunds. :)

"Amendment to the PayPal User Agreement

Refund Fee. Section 8.5 (Additional Fees) is amended to add a new refund fee. If you refund a Purchase Payment, we will retain the Fixed Fee portion of the Purchase Payment Fee. The buyer’s Account will be credited with the full Purchase Payment amount and the Fixed Fee portion of the Purchase Payment Fee will be deducted from your Account in addition to the amount of the refunded payment. The Fixed Fee will depend on the currency of the Purchase Payment and is listed in 8.4(c).

Fees: The following fee for Refunds will be added:
Refund *

After August 10, 2010, the Fixed Fee portion of the Transaction Fee will be deducted from your Account at the time of the refund, in addition to full payment amount that is refunded to the buyer. Fixed fee portion of the original Transaction Fee.

(The Fixed Fee will depend on the currency of the payment, so if the payment was made in USD then the refund fee is $0.30.)

* Excludes Direct Payments and Virtual Terminal Payments where an American Express Card is used."

More information here:

Finally Paypal has put itself at par with third-party payment services such as 2checkout, Plimus, etc., that have always charged a fee to the vendor even for refunds. Think this would make the "other" payment services happier! :D (kidding). I don’t know about Clickbank’s policy in this regard though; I have done way too little business with them as a vendor to know for sure! :)

I read on a (private) forum that one Paypal rep claimed that their fees are still "very competitive" compared to the "industry standards", and that is probably true. Seriously, these "refund fees" are not going to break the backs of established marketers, but newbies would certainly feel the punch! Personally I have way too few refunds to even bother about this! :D

Anyway you are free to rant, vent and moan on my blog about it if you like. Maybe, just "maybe", Paypal would change their policies after noticing the "public outcry", who knows (wishful thinking)! ;-) Just click here to vent away! :D

Preaching you at this point would be just too much, but I would tell you this: one of the reasons why I stopped selling information products/ebooks years ago is because of their relatively high refund ratio compared to other types of products. This is just my personal experience and that too only in the internet marketing niche (in other niches the refund rate for ebooks are relatively low, except perhaps the self-help niche) and I am in no way asking anyone to stop writing and selling ebooks. I believe that after books, ebooks are probably the best way to pass on information to another person. Sure, multimedia is there, but if I am given a choice between ebooks and multimedia, I would choose the ebooks.  


  1. Joey J

    I think it is bogus!!! As a software developer, why should I be fined because some a*s wipe decides to blatantly rip me off by requesting a refund 26 seconds after downloading my software product?

  2. Alan Petersen

    They’re just not refunding the $0.30 fee that is already added to every payment they process so not really a new fee… there just refunding the transaction fee back to you as they used to do. It cost PayPal to process all transactions so I’m surprised they haven’t done this sooner.

    Doesn’t bug me. I don’t get that many refunds and now this new refund fee can’t be written off during tax time.

    If people are so upset about it, don’t use PayPal or don’t allow refunds for your products. Problem solved. :-)

    1. Arindam

      You have put it right Alan. As I said, this is something other payment processors have been already doing. Only Paypal took it so long to implement it. Maybe the “inflation” compelled them LOL ;)

  3. Lane Lester

    I’m not making enough money for this change to concern me. I do wish PayPal were easier for newbies to use, or that we had an easier payment method.

    BTW, speaking of spam comments, are you aware of the controversy over Akismet’s automatic deletion of non-spam comments? There’s quite a conversation about this at (not my site).

  4. Arindam

    @Lane, RE: Akismet

    Is this for the new version of Akismet? If so, I am glad I did not upgrade. My blog would have been a desert then. Anyways, one tragedy befalls after another: first Mayday, then Paypal, now Akismet. :P

  5. Joey J

    Alan Said: “If people are so upset about it, don’t use PayPal or don’t allow refunds for your products. Problem solved.”

    I have several merchant accounts, however, for some, PayPal is all they CAN use (for whatever reason) and you also have cases where PP is the ONLY method some customers will use…

    It’s not always as simple as not using PP or not allowing refunds. If a customer files a complaint with their CC company, it is refunded almost automatically. PayPal also usually sides with the customer as well.

    If a customer purchases my software, and finds out s/he genuinely can’t use it or it isn’t what they thought it would be, or if I failed to explain the product properly, I have absolutely NO PROBLEM offering a refund and eating the 30¢ cost — better to make friends than enemies as well as learn from my mistake, however…

    What appalls me is the many many people who request refunds immediately after downloading the product, not even waiting long enough to make it appear that they had time to install it and at least try it out, you know.

    The chronic refunders as they say…

    I have no problem with the new policy for legitimate refund requests. I just think PP should take better care of their vendors in trying to implement a “chronic refunder” policy as well, LOL.

  6. Lane Lester

    Yes, it evidently has been true for some time. If you’re going to use Akismet, you shouldn’t check the checkbox; most people (including me) are confused by what it means. Also, if someone doesn’t like the word “business” he can mark it as spam, and if it happens enough, Akismet will start spamming your comments over the Web. I’ve switched to a captcha, blacklist, and admin approval.

  7. Arindam

    One of the best (though expensive) solutions for you, Joey, would be to install a server-side validation script which checks for refunded transactions and immediately invalidates the software license. I know a lot of Internet marketers who do this, but as I said, implementing the technology is quite expensive, even if you use one of the existing technologies available out there (they go by the names of “software shield” or something like that, do a Google search for “software piracy” or “software protection” and you would find them). There are two kinds of software protections available: manual and automated, and I believe the manual method costs less, although more laborious for you. :)

    Plus you should really need to be on a VPS at least for reliability’s sake because with a shared hosting if your site is down some of the time then your honest customers would not be able to validate their licenses and that would p*ss them off :)

    Or, instead of daily check, you can add a monthly check to the software. Be prepared to receive questions like “why cannot I use your software anymore” or “please send me a working version of the software” from those “chronic refunders”, the moment you disable the software :D

  8. Arindam


    “Automatically discard spam comments on posts older than a month.”

    Do u mean that checkbox? If means Akismet would delete spam comments posted on articles that are more than 30 days old. Sounds legit, because those are the most spammed articles anyway, the reason why I auto-close comments after 35 days.

    I don’t see any other checkboxes, sorry. :P Maybe I am being dumb and you can point me in the right direction. :)

    IMO captchas annoy legit commenters more than anything else. Captcha breaker tools have been available for quite some time, so not much of a big hurdle for spammers. Human verification systems such as math comment spam would be more effective. :)

  9. Joey J

    @Arindam: Thanks for the reply. I already have the capability of using such a “validation” feature, however, I will not use it for many reasons, one of which is the fact that they are easily avoided as well. Any software I create that requires internet access for anything is stored on a my own dedicated servers. I currently run 3 dedicated servers and a mirror for each to ensure customer satisfaction.

    Several additional problems with “call home” features are: server uptime/downtime, customers feel like your invading their privacy, some cause false negatives with some of the AV systems out there and many many additional downfalls.

    As I said, I really have no problem with PayPal charging, especially at just 30¢, I mean, come on… that’s nothing.

    What I am saying is that PP spends all the time, money and resources figuring out ways to fatten their wallet with no concern for the honest sellers, you know.

    Heck, in some cases, I feel they (PayPal) should charge a heftier fee. Then, maybe the vendors would start working together more to toughen their own “No Return” policies and perhaps cut down on the chronic refunders. If all the vendors started speaking up, perhaps PP would finally try to create a system which would protect us as well as the buyer, you know.

    I mean, I realize that PP thrives on buyers, for obvious reasons, LOL, but if enough sellers started speaking up and PP realized we’re gonna start fighting back, then maybe they’d realize that they can’t thrive without sellers because then there is no need for buyers, know what I mean?

    1. Arindam


      Paypal and in fact any payment processors definitely thrive on sellers, aka, merchants, for without those sellers there won’t be buyers, right? However when it comes to refunds then PP (and others) has to take customer’s side for obvious reasons; in fact any other payment processor I know of would do the same. To them, more important than fighting a small refund/chargeback is to keep their merchant accounts intact. Say, you have a “no return” policy and the customer does a chargeback. Enough of these chargeback’s and your merchant account can even be shut down (I know that is extreme but happens). Then of course sales conversions could also be affected by a “no return policy” : even honest buyers like me would hesitate to buy from a page with no guarantee of any kind. :)

      I do feel your pain; been there, done that, except that in my case it happened to be “ebooks” as I mentioned in my article. However, thankfully chronic refunders are still fewer than honest buyers and the best thing you can probably do (if you are not willing to implement any server-side validation for this) is to ban them from ordering any of your stuff in future. That is what I personally do. :)

  10. Malathy Badri

    Well, it is ok. I don’t mind the 30 cents but I wonder why such a policy is implemented by Paypal. I think Paypal employees have just asked for a raise in their salary.

  11. greg cryns

    It’s a non-issue for me. When I read your headline I was worried. But I can take the 30 cents in stride.

    If you do your job correctly, your refunds will not be a big issue IMO.

  12. Bcarter

    I hurts to say this, but PP is just passing on the fees that they are charged by their merchant account processing company.

    If they don’t keep the 30 cents on a refund then they would need to raise their rates on the initial payment. Personally, I’d rather have it this way.


  13. Forest@Frugal Living

    Luckily it does not affect me too much but it’s a pain in the backside…. Especially as you always get a bunch of people who buy and get refunds just for the hell of it…. With digital content they are basically thieves and now these thieves will cost you money :(