Tom-Chris Emewulu
Chargeflow's Digital Evangelist
Table of contents

In a previous article, we evaluated the new PayPal Merchant Policies Update, which has replaced chargeback fees with a dispute fee for transactions processed either through a buyer’s PayPal account or through a PayPal guest checkout.

As the policy update has now taken effect, many vendors are curious to know what other monetary implications the PayPal dispute fee policy might have for their business. And in response to those demands, we’re sharing this piece to help you get a closer look into the PayPal dispute fee policy and what the changes in chargeback mediation processes could mean for your company.

#1: What is the new PayPal dispute resolution fee, and why does PayPal charge them?

As the name implies, a PayPal dispute is when a customer files a complaint concerning a specific order. As part of its operational procedures, a buyer has the right to open a dispute on the platform if they have an issue with a particular PayPal transaction. PayPal expects both parties to work out their differences amicably. But if that doesn’t help, or if the buyer feels that launching a dispute will be a long arbitration route, they can escalate the issue to PayPal by converting the dispute into a claim. PayPal will then step in to help them sort things out by placing a temporary hold on all funds involved in the disputed transaction until they resolve. Once PayPal issues a decision, they’ll either release the vendor's funds or refund the buyer. That is known as a Claim.

Until last December, when the new PayPal dispute fee came into force, the dispute mediation process was a free value-added service provided by PayPal. They didn’t charge fees on disputes unless the arbitration process escalated to a Claim. Unfortunately, those freemium service days are now over with the inception of the dispute fee policy, thereby shifting the PayPal disputes mediation responsibility to vendors.

Starting from last December, PayPal charges dispute fees for resolving both transactions made through a buyer's PayPal account and a PayPal guest checkout. The dispute resolution fee applies to these transactions when the dispute goes from an inquiry to a Claim and when they file a bank chargeback with their card issuer or a cancellation with their bank. However, the dispute fee does not apply to transactions processed through PayPal Pro or advanced credit card processing, which are sometimes referred to as "unbranded" transactions.

It is important to also note that the new PayPal dispute fee is different from the already existing chargeback fee. But the costs will apply ONLY when a buyer escalates a dispute into a complaint.

And as we clarified in the initial piece on this subject, this policy change seems like PayPal’s attempt at potentially reducing the number of disputes they’ll have to meditate. Given that research has found that chargeback is now a $12 billion problem as e-commerce transactions continue to explode, introducing the dispute fees policy is a smart, proactive business move. Except vendors who don’t understand the processes will incur additional operational costs.

#2: How much is the PayPal dispute fee, and how is it calculated?

PayPal $15 dispute fee

The dispute resolution fee depends on the percentage of complaints filed against a vendor compared to their total sales during the last three months. 

To that effect, there are two categories of the PayPal dispute fees: The Standard Dispute Resolution Fee and the High Volume Disputes Fee.

The standard dispute resolution fees apply unless your dispute rate is 1.5% or more, and you have completed more than 100 sales transactions in the last three full months. In that regard, PayPal charges a High Volume dispute resolution fee to each dispute reported after the 1.5% rate. But in more specific terms of what we currently know, PayPal pegs the Standard Dispute Resolution Fee at $8*. Below is a quick rundown of the fees by currency:

Standard Dispute Resolution Fee Table:

PayPal Standard Volume Disputes Fee
PayPal Standard Volume Disputes Fee

Although the policy update article did not give enough detailed information as to whether this might change in the future, it suggests that in some cases, PayPal will not charge merchants any dispute fee at all. “If a merchant does not communicate directly with their buyers, and it is escalated to PayPal to mediate, that is when the fees are applied. If the merchant historically acted in this manner, they will see an increase in costs. If the merchant engages consumers directly to resolve disputes, they will not have this fee applied and could see a reduction in the costs,” it reads.

As intimated above, PayPal calculates the dispute rate by evaluating a merchant’s total value of claims and sales over the previous three months. The sum of claims involves the transaction value of all claims filed directly with and escalated to PayPal, except claims for unauthorized transactions, as well as all chargebacks from card issuers or bank reversals.

Again, a merchant’s dispute rate can change from the Standard Rate to the High Volume Rate over time. Apart from the excessive dispute fees, High Volume Dispute Fee merchants don’t get certain benefits such as immediate access to transaction funds. They are also charged a dispute fee for all claims and chargebacks they don’t resolve amicably, regardless of the dispute outcome.

High Volume Disputes Fee Table:

PayPal High Volume Disputes Fee
PayPal High Volume Disputes Fee

#3: Some critical exceptions to PayPal dispute fees you should know

Surely, this policy change presents a significant bottleneck to vendors. But they've made some critical exceptions you should keep in mind. First, PayPal states that sellers won’t be charged the Standard Paypal Dispute Fee for disputes that are:

  1. Inquiries in PayPal’s Resolution Center that are not escalated to a claim with PayPal
  2. Resolved directly between the seller and the buyer and not escalated to a claim with PayPal
  3. Filed by the buyer directly with PayPal as an Unauthorized Transaction
  4. Eligible for PayPal’s Seller Protection program
  5. Claims with a transaction value that is less than twice the amount of the Standard Dispute fee
  6. Decided in seller’s favor by PayPal or by the issuer

As in the case of the Standard Dispute Fee, PayPal explains that merchants will not be charged a High Volume PayPal Dispute fee for disputes that are: 

  1. Inquiries in PayPal’s Resolution Center and not escalated to a claim with PayPal
  2. Resolved directly between the seller and buyer and not escalated to a claim with PayPal
  3. Filed by the buyer directly with PayPal as an Unauthorized Transaction

The fine line is that if a merchant appeals and wins the Standard Dispute Fee case, both the disputed amount and the Standard Dispute Fee may be reimbursed, but PayPal will not refund the High Volume Dispute Fee as it does not depend on the case outcome.

With that understanding, let’s have a look at how you can manage your PayPal disputes and chargebacks excellently.

#4: Avoid incurring PayPal dispute fees and chargebacks with these best practices

Chargebacks are already an existential threat to e-commerce businesses before PayPal dispute fees got thrown into the mix. And since many merchants believe the mitigation process is skewed in favor of buyers, the disputes and chargeback landscape is about to get even more challenging with this new rule.

Communicate to Resolve customer dispute

If you are new to the e-commerce landscape, you might be curious to know more about the significant reasons for PayPal disputes, and as disputes are the precursor to a chargeback, the grounds are the same. Below are some examples of what causes PayPal disputes and chargebacks:

  1. A buyer purchased an item or service, but the seller didn’t deliver on time or at all.
  2. A vendor shipped a damaged, defective, or significantly-not-as-described item to the buyer.
  3. The vendor charged the customer multiple times for the same order.
  4. The cardholder received an authorized transaction charge.
  5. The cardholder does not recognize a transaction charge and senses some foul play.  

For best practices in navigating your way through, below are useful insights that can help you mitigate the dispute fees and incidental chargebacks.

An overview of how to aptly respond to a customer dispute

When you get a dispute notification, you don’t have to fret as there are simple actions you can take to mitigate the threat. 

Immediately upon receiving the PayPal dispute notification, engage with your customer to see how you can work out the differences. Communicating with and being responsive to your customer will go a long way to ensure they don’t escalate the PayPal dispute for arbitration. 

Use the following communication guide can be useful in crafting your dispute mediation process:

Start the conversation with an open mind

Research has found that many PayPal chargebacks are the result of merchant error. Hear your customer’s side of the story, and don’t make unnecessary assumptions. Get all the data you need to make a well-informed decision on the PayPal dispute; rushing into action at first sight of a dispute can result in a double negative of lost revenue and impaired customer relationship.

Be willing to settle the dispute with your customer

If you are unwilling to settle the PayPal dispute amicably, then there’s no use talking to the customer. Your disposition will determine the reaction of the customer in most instances. Be helpful, show the cardholder that you intend to resolve the PayPal dispute, and you would’ve set the tone for mutual collaboration. Stay focused on finding a solution, not on proving why you are right. A compromise today could open doors for more businesses in the future. In the end, it’s in your best interest to settle the dispute with the customer rather than have it escalated into a claim, which will cost you more resources.

Be proactive in avoiding PayPal disputes with excellent customer relationships

If your business is facing a difficulty that could result in not meeting your clients' expectations, you have to find creative ways to get your customers on your side. For example, PayPal designed The Resolution Center to help merchants communicate with their customers and avoid a dispute. If you face a challenge that could result in delays to fulfill orders or a shortage of supplies, you could leverage the platform to send a message to your customers, informing them of that challenge. That way, you don’t leave your customers in limbo, wondering what happened, as that can lead to them filling a PayPal dispute.

Automate your PayPal Disputes response

Taking the actions above are only precautionary measures to enhance your chances of dispute management success. The reality is that you can do everything we stated and still have PayPal dispute issues for various reasons. Hence, it’s wise to secure an extra layer of security by integrating a PayPal dispute and chargeback automation service such as Chargeflow. Unlike other PayPal dispute management tools out there, our technology tool makes use of artificial intelligence and machine learning to recognize when a dispute on a payment occurs and fight those PayPal disputes and chargebacks as you’d wish. Chargeflow’s PayPal dispute automation service pairs the power of technology with human intelligence. We help the boldest brands worldwide focus on building their brand, serving their customers, and building better products. Our super in-depth analysis and real-time statistics allow you to manage and understand your chargebacks without breaking a sweat.

Why you should automate your PayPal disputes and chargeback management

Resolve PayPal dispute with Automation

Dispute automation serves the greater good. Besides freeing your employees to focus on the crucial business metrics that move you towards actualizing your corporate innovation and market acquisition goals, they are also more cost-effective than manual, in-house processes. Below is a quick glossary to help you decide when to automate your PayPal dispute and chargeback mitigation efforts:

  1. You get 10-20 disputes per month - This could mean that your company's business practices are at a higher risk for chargeback fraud. And you should be using an automated dispute management system.
  2. You lose too many PayPal disputes - Many merchants have found that even after going the extra mile to resolve a dispute, they still lose. If this is you, then thank your lucky stars! We designed Chargeflow's PayPal Dispute Automation to help you recover more money.
  3. You waste too much time in your chargeback mitigation - Chargeflow is the world's first, fully managed dispute and chargeback automation service, designed specifically for eCommerce merchants. Our service gives you the liberty to enjoy more free time to focus on building your brand, serving your customers, and building better products.
  4. You sell intangible items - According to PayPal's terms of service, in every instance, you do not provide proof of delivery for an item, they will favor the buyer. Many buyers use this knowledge to get the best of merchants on items delivered virtually. But with Chargeflow's PayPal Dispute Automation, you don't have to worry about a thing. We will have your back at all times!

If the above scenarios fit your business operation, then you must not hesitate to automate your dispute mitigation processes. With our software, you can comfortably predict and stop those costly PayPal disputes and chargebacks before they even happen. Our industry-first solution offers e-commerce merchants flexible workflows and unique features such as ChargeScore®, ChargeResponse®, and ChargeSync®, along with our a 9x ROI guarantee and actionable analytics. You don’t need to worry about integrating multiple tools for analytics, fraud scoring, and mitigation as all of your dispute, chargeback, and fraud mitigation needs are met in a straightforward platform. Sign up here and enjoy the ease of doing business!


Average Dispute Amount
Average Dispute Amount
# Disputes Per Month
# Disputes Per Month
Time Spent Per Dispute
Time Spent Per Dispute
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Want to learn how Chargeflow can recover more money for you? Sign up and get a free dispute analysis

Related Articles

What's Chargeflow?

Try it for free

Full Dispute Automation

No more manual work, Chargeflow fully-automates your dispute process from A to Z.

Simple Integrations

We use official and secure API's from our approved partners. We also made it extremely easy to connect.


You get charged only when we help settle a dispute in your favor.


ChargeResponse® uses smart algorithms to generate the most comprehensive evidence response, with industry-leading recovery rates.


ChargeScore® uses proprietary algorithms to determine the chance of recovering each dispute.

Actionable Analytics

In-depth disputes statistics at your fingertips.

Built for eCommerce

Made by DTC Entrepreneurs, for DTC Entrepreneurs.


OAuth 2.0, 128 Bit SSL, secure data encryption, official, secure API's. We have them all, and more.

Get Started with Chargeflow

Chargeflow helps you focus on your business without the burden of disputes, chargebacks and fraud holding you back.

With a fully-featured, automated dispute management solution that offers flexible workflows and unique features such as ChargeScore®, ChargeResponse®, along with our ROI guarantee and actionable analytics, all of your dispute needs are met in one simple platform.