This New PayPal Change is Upsetting Business Owners

 In Payment Card Industry News

PayPal is the easily the biggest name in small business card payment processing, handling most of the payments for sites with user stores like Etsy and eBay – as we businesses relying on online payments every day. Users of the platform were alerted to another set of changes to the PayPal Terms of Service on April 14th, leaving some sellers upset at the updates. Here’s what you should know about this newest round of revisions to their policies.

Refunds Will Cost More

Prior to the changes, here’s what a refund looked like:

  • Seller refunds the buyer a part or all of their payment price
  • PayPal refunds the seller the 2.9% processing fees deducted from the original payment, minus a $.30 transaction fee
  • Buyer paid no fees for the original purchase or the refund.

Under the new terms, sellers would still be expected to refund the buyer the entire cost of the refund, but the 2.9% PayPal fees wouldn’t be restored to the seller’s account. The seller will now be out all of their fees associated with a payment, even if that payment is reversed or refunded.

While it may not seem like much at first, the changes will disproportionately affect sellers who have a high rate of return. Those who do custom products at a high price point, for example, could also see big losses. A furniture seller who is asked to refund the price of a $1,000 table would still have to refund the full $1,000 to the buyer, but would then have to make up the $29 in PayPal fees on their own. This would presumably be taken from the seller’s PayPal account directly or through a draw from their linked checking account.

How It Might Affect PayPal Sales

Many small business owners are upset about the changes, as it will cost them. Some have discussed charging a restocking fee to cover the fee loss for items that are returned, but this may not solve the problem of a canceled order where merchandise was never delivered. Other sellers may feel that they have to change their return or cancellation policies to make them less favorable to consumers.

When Will It Start?

The new updates officially rolled out on May 7th, 2019, leaving sellers without much time to update their storefronts to mitigate potential losses. Ultimately, however, the only way out is to close your account with PayPal and choose to work with a reputable merchant services provider like Motus Financial.

About Us

Locally-owned and providing personalized service, Motus Financial provides a complete suite of POS technology services to assist merchants in processing payment from credit cards, debit cards, and checks. For more information, please contact us at 608-819-8666 or check out our website at and we look forward to assisting you.