PayPal have announced changes to their User Agreement for US users which will come into effect on the 7th of May 2019. The most concerning change is that if you make a refund, PayPal will no longer refund the PayPal fees charged on the original transaction.
“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.”
– PayPal Policy Updates
Currently, if you’re in the US you pay PayPal fees comprising two parts – a flat $0.30 per transaction plus a percentage of the payment. Until now, PayPal would refund the percentage fee but keep the flat $0.30 if you refunded. Now, from the 7th of May PayPal will charge you fees when you are paid, but if for any reason you have to process a refund they’ll keep all of the percentage fees as well as the $0.30.
This will be an annoyance on low value items, but if you are selling high value items and you have to make a refund, regardless if the item was lost or broken in transit, they buyer changed their mind or for any other reason, PayPal will still be getting their cut. This will hit sellers hardest in categories with traditional high return rates such as apparel. Every return will cost you the PayPal fees.
PayPal are also raising fees in other ways. They are starting to charge US users a new variable fee instead of a flat rate when they send month to friends and family outside of the US. The new variable rate will be 5% based on the amount sent with a minimum of $0.99 and a maximum of $4.99 per transaction. They are also 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.
There is one bright spot on the horizon and that is very soon US PayPal users won’t have to bother with PayPal when selling on eBay. As eBay Payments roll out and once PayPal is included in eBay Payments, the relationship will be between eBay and PayPal, not the seller and PayPal. It will be eBay being stiffed for fees every time an eBay seller makes a refund and the buyer paid with PayPal.
As is the norm with PayPal policy changes, they have told their US users that if they don’t like the fact that PayPal will keep their fees when transactions are refunded, they can close their account.