Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Tue Apr 2 2019 13:45:18

PayPal Just Made Returns and Refunds More Expensive

By: Ina Steiner

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Online sellers are concerned about a change PayPal is making to its User Agreement that could prove quite costly to sellers. According to the PayPal notice, PayPal will no longer credit fees for refunds for returns or other reasons:

"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."

An EcommerceBytes reader explained what the change will mean to them:

"In the past if a refund was process Paypal has retained the fixed part of the processing fee but did return the % part of the fee. Now it appears that if a seller now does a refund, PayPal will be keeping 100% of the processing fee.

"Previously if a buyer purchased something for $100.00 and paid through PayPal the seller was changed a $.30 fixed transaction fee and 2.9% of the $100.00 or $2.90, the seller ended up with a net payment of $96.80. If the seller refunded the payment for whatever reason PayPal returned the entire $100.00 to the buyer but retained the $.30 fixed transaction fee. The end result was that it still cost the seller $.30 to process the fee. Now it appears that PayPal is keeping the entire fee of $3.20 even if the refund is immediately processed."

The reader said there are numerous reasons why a seller might have to issue a refund. "The list of why a seller may have to refund is exhaustive so this seems like a HUGE money grab on PayPal's part."

On the eBay boards, a seller wrote of the change in policy, "That is huge if you sell a high priced item as the Paypal fee originally charged to you could be rather significant and now you will not be getting it back even though you are refunding the buyer. It goes into effect on May 7, 2019."

It could cause sellers to rethink their returns policy. One seller said, "Free returns just got more expensive, will need to reconsider."

PayPal is making additional changes to the User Agreement, including the following:

"We're removing the flat rate pricing for sending money to friends and family members who have PayPal accounts in a country other than the United States and introducing a new variable fee of 5% based on the amount you send with a minimum of $0.99 and a maximum of $4.99 per transaction. We're also removing any variation depending on the recipient's country. 

"We are changing the currency conversion spread to 3.25% over a base exchange rate in situations where you are a sender of money in a PayPal transaction."

Be sure to read the entire announcement and familiarize yourself with all of the changes PayPal is making.

And let us know how the changes impact you and your business. Will you be rethinking your returns policy?

Update 5/12/19: As we reported yesterday, PayPal reversed the new policy, see more information on this post.



Comments (110) | Leave Comment | Permalink

Readers Comments

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: sasikat9 This user has validated their user name.

Tue Apr 2 14:00:40 2019

In all the years we have done business with paypal we have never transferred any money to anyone friend or enemy. As far as the paypig keeping all the fees now on a refund thats just another reason to not list anything worth more than a few dollars on any site, These bozos are just going to price themselves out of business in a few years.

Makes Greedbay plan look even better doesn't it. NOT

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: RL15 This user has validated their user name.

Tue Apr 2 14:18:16 2019

the ceo of fleecebay will copy this once all sellers are trapped into mangled payments.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: Silver Ice King This user has validated their user name.

Tue Apr 2 14:35:00 2019

Well I guess Paypal got tired of losing all the money due to Ebays increase in returns due to them encouraging Buyers to return things for the most minuscule reasons.  Luckily i do not get many returns at al, but when i used to return for overpaid shipping due to Ebays ineptitude (which will never change as they are desperate for any kind of growth).  

I believe that many sellers will be eliminating their participation in the Free Returns program just to qualify for the TRS+ 10% discount as this can result in way more income lost due to this change than the discount covers.  Ebays move to try and counter this will be next:XX

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: pace306 This user has validated their user name.

Tue Apr 2 14:36:04 2019

"Will you be rethinking your returns policy?"

We already have a no returns policy - this doesnt change anything for us.

Its obvious that as time goes on and the separation between eBay and Paypal gets "wider", the secret hush monies that used to float between them (that were probably never on their 10K statements) needs to be gotten from a new source aka the seller.

If they price themselves out of the money transfer market - then so be it - greed has taken down alot of businesses.

As for the eBay "hidden fee increase" ..... JD & DW are 2 birds of the same feather ... just soak the seller - they have no choice.

greedy SOB's ...

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: NoMoreEbay

Tue Apr 2 14:50:12 2019

What I think is thank G-D I quit selling online in September 2018.

What we're witnessing here is the basic human trait of greed. Take, take, ,take until there's nothing left. Less money for sellers means less money to invest in inventory resulting in less goods sold. And the cycle starts all over again until there is just no more to take.

ebay, etsy, paypal and companies like them are killing the online selling experience piece by piece. And if anyone thinks ebay's Managed Payments won't adopt this model after their disingenuous free-ride first year, you might want to reconsider you're selling future.  

Just a few years ago I was able to buy inventory and realize a small but decent profit. Today, I would actually lose money because of all the fees and BS.

Screw you, you greedy scumbags. Thanks for nothing!

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: NoMoreEbay

Tue Apr 2 14:59:00 2019

So now, seller pays shipping both ways for a false SNAD, gets a ding which counts towards the 4% extra fee and THEN loses the fee he paid for the transaction to begin with.

And if the buyer's smart and waits 5 months and 29 days to file his false claim with paypal, the seller will lose the 10% ebay fee PLUS the paypal fee PLUS the original shipping cost.

All while ebay steals relisting fees for GTC.

This is what people want to be a part of? Seriously?

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: Crasoum This user has validated their user name.

Tue Apr 2 15:05:07 2019

I have been using Paypal since 2003. I have used it to sell with eBay since then, but unless they take away the variable part of this cash grab then I'll just migrate over to eBay's managed payments and my own credit card processor.

I understand Paypal not wanting to refund the 30 cent (or the 5 cent if a business/person is using a microtransactions account) fee. I disagree with it but not strongly enough to migrate. But tacking the variable fee on with this is something I won't accept as a business.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: The End

Tue Apr 2 15:08:21 2019

DO NOT USE PAYPAL !
They are Not registered in all of the Continental 48.
STAY AWAY FROM PAYPAL.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: NoMoreEbay

Tue Apr 2 15:21:33 2019

"then I'll just migrate over to eBay's managed payments..."

Something tells me some backroom meetings were hoping for this very sentiment.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: Crasoum This user has validated their user name.

Tue Apr 2 16:16:19 2019

Regardless, I'd rather not get charged for being nice when it's literally never been an issue in the entire existence of PayPal before.

Not that I do a ton of returns inherently, but with eBay pushing towards free returns, and now PayPal charging for refunds the natural choice is to change.  

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: OnlyPollyPocket This user has validated their user name.

Tue Apr 2 16:34:10 2019

I will be adding a condition to my listings that I will combine shipping if buyer uses cart so that ebay calculates the combined shipping but otherwise I will only refund the portion of shipping that remains after I deduct the Paypal fee that will no longer be credited back to me "PER PAYPAL'S NEW POLICY"

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: Marie

Tue Apr 2 16:41:21 2019

There is so much more involved here than just the effect this change has on the costs of returns.  

1.  Returns Cost More
2.  Cancellations for ANY reason cost more if a payment was involved.
3.  Partial refunds for damaged items or some other reason to offer a partial refund to your buyer for an item they received.
4.  Partial refunds to buyers for over payment of shipping charges.

It is just going to cost sellers MORE MONEY!

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: Lightning

Tue Apr 2 18:00:40 2019

I'm surprised it took PayPal this long to figure out that they were messing up.  Under the current policy that PayPal has in place, they deliver their service and you pay.  Then you wanted them to UNDO their service and not only NOT get paid to accomplish that, but give you BACK the money from the first service they provided.  And they did!!  That was just dumb on their part..  

PayPal is a service company, like Uber for instance.  You call for an Uber ride, get there, change your mind, take the Uber ride back home.  So you owe the driver nothing, right?  That is the existing PayPal policy (except for 30 cents, oh my).  We should all be thankful they are agreeing to make the refund for free, and not charge us BOTH ways, fixed and variable amounts, or charge us ANY time money is transferred in any direction.  Same as your bank.  If you sent a wire transfer one way, and then sent the same amount back, you get hit twice.  Two services, two fees.  You can't just tell the bank to reverse the transfer and waive all the fees.  I would love to see the expression on the manager's face when you proposed that idea, followed by a long laugh.  

We've been living in a dream world with this liberal PayPal policy.  Time to wake up.  There will be much more fee ''creep'' as time goes on.  Your other choice is......?

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: Jairib This user has validated their user name.

Tue Apr 2 18:28:07 2019

Ugh, yes the cancellations.  That is some BS.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: Crasoum This user has validated their user name.

Tue Apr 2 18:35:23 2019

@Lightning
Well there's three types of credit service types, Net Pricing (which is what Paypal was doing) Gross Pricing (What Paypal is moving to) and Gross Plus Pricing (Which would be where a credit card processor charges transaction fees on the transaction and the refund, plus the initial flat rate fee. IE what you are saying it could be if it were worse.)



Other choices are Stripe (As they will both be on parity if Paypal doesn't change course.), eBay's managed payments (cheaper overall, currently.) or your own merchant account.  

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: Lightning

Tue Apr 2 19:25:14 2019

@Crasoum
It's been a great many years since I had a merchant account.  I can't remember if you got charged a fee on a return.  I seem to remember that either way the money went, Visa, MC, or Amex got their cut.  But I'm pretty sure you didn't get rebated the initial purchase fee in any way.  That would be un-American.

In any case, I see tons of room for cash-grabbing companies to reach a lot deeper into our pockets.  Ebay could easily raise fees, seeing that their current 10%-ish fee is WAY below Amazon's we'll-just-keep-all-of-it fee.  And PayPal could double and hardly anyone would move.  Call it Gross Plus or just plain Gross, it will be tougher to eek out a buck as time goes by.  And if one starts to look cheaper than the rest, they'll soon fix that by price-matching upward.  

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: toolguy

Tue Apr 2 19:57:51 2019

Paypal: dear seller,

Our stock hit an all time high this week and we're making money hand over foot.

But we find a need to squeeze just a little harder! (we learned this from eBay)

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: Rexford

Tue Apr 2 19:58:10 2019

GRRRRRRRRRRRRRRRRREEEEEEEEEEEEEEEEEEEEEDDDDDDDDDDDDDDD!!!!!!!!!!!!

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

This user has validated their user name. by: Rexford

Tue Apr 2 20:06:49 2019

And eBay killed the restocking fee.   At least you could have recovered some of your money.

So now a buyer pays.  Contacts you an hour and asks you to cancel their order.  And you still pay.

All of these sites think that sellers are fools and will continue to take the beatings. They have never been more wrong about that.  This thinking on their part will be their folly.

Perminate Link for PayPal Just Made Returns and Refunds More Expensive   PayPal Just Made Returns and Refunds More Expensive

by: ebayout This user has validated their user name.

Tue Apr 2 21:54:34 2019

I quit offering international shipping except to Canada because of the uptick in returns reported by others. I've never had one, but I'm not gonna risk eating $60+ for shipping/return shipping going forward.
Now this...I'll cap my auctions at $50-$60. I'll eat a couple bucks, but that's it.
As stated above, how far do the loonies think they can push sellers before they get back a couple of middle fingers?

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