Even though PayPal is well-known for being secure, easy to use, and easy to integrate if you’re a seller, it doesn’t come without its issues. As with most other payment processors, PayPal is susceptible to abuse, especially when it comes to PayPal chargeback fraud.

There are a couple of ways you can fall victim to fraudulent activities as a merchant, and it’s important to know about most of them so that you can prevent PayPal chargebacks and avoid losing money. In this article, we will provide you a better insight on the ins and outs of Paypal scams, and hopefully save you quite a bit of money in the long run.

Common PayPal Chargeback Scams

If you’re processing PayPal, keep the following PayPal credit card scams in mind:

Fake Email Scams

Creating a fake email account in today’s day and age is a piece of cake. Consequently, there are millions of fake email accounts that are used solely for fraudulent activities.

In case of the PayPal fake email scam, the principle is pretty simple – the scammer will send an email (that appears to be from PayPal) to the merchant telling them that PayPal is holding the funds until the seller provides a tracking number for the shipment.

DO NOT trust these emails because PayPal does not work that way. The company will never act as an escrow, nor will it withhold funds based on the aforementioned reasons.

The scammer’s idea here is to cause panic and rush you to ship the item and send them the tracking number. Once the item is shipped, it’s gone, and there’s very little chance (if any) that you’re getting the product back.

Phishing Scams

Phishing scams are usually executed via “infected” emails. In simpler words, the scammer will send an email that appears to be from PayPal stating that money has been transferred to your account and is pending confirmation. All you have to do is click the link or button that is attached to the email.

Needless to say, DO NOT click on ANY emailed links as 99% of them are phishing links created to steal your PayPal account, and presumably, all your money. PayPal will never send you messages of that nature, so DON’T click on them!

Scams With Shipping Addresses

This is also one of the simpler but quite effective scams. In this case, the scammer will ask the seller to ship the package to a non-existent address. After a couple of failed attempts to deliver the package, the shipping company will flag it as undeliverable.

Once the shipment is flagged, the scammer will call the shipping company and provide them a legitimate address. Subsequently, they will file a complaint with PayPal stating they never got their product. In this case, the merchant does not have valid paperwork to refute the client’s claim because the original transaction is tied to a non-existent address. The Seller Protection program does not cover these cases, so you’re bound to lose both the item you’ve shipped and the funds.

Scams with “Overpaid” Items

Another scam that’s quite popular and definitely deserves a spot on our list is the so-called “overpayment scam.”

The way it works is rather straightforward – the scammer will overpay a particular article on purpose and subsequently notify the seller about the predicament they are in. On top of that, the buyer will ask the seller to reimburse the overpaid difference.

Once the seller refunds the difference, the scammer will then contact PayPal and make some sort of friendly fraud claim, eg. their account was hacked and that they had no intention to buy the product in question in the first place. Subsequently, PayPal will reimburse the original payment (fully), meaning you’ll lose both the product and the money you’ve refunded (the overpaid difference).

Problems With Hacked Accounts

The main thing you should remember is that even if you protect yourself from PayPal credit card scams, it doesn’t mean you won’t be a part of one. Once you’re involved (involuntarily), it’s quite hard to fight your way through and come out whole.

For example, many people will fall victim to the aforementioned phishing scam; there’s nothing you can do about it. The hacker can spend money to buy something from you without raising any suspicion. However, once PayPal discovers an account was hacked, the transaction will be reversed, and you’ll lose the item you have shipped. In some cases, PayPal will reimburse your losses, but only if you’re able to prove that the account you were doing business with is/was hacked.

How To Avoid PayPal Chargeback

paypal chargeback fraud

While you cannot fully protect yourself from the plethora of scams plaguing this industry, there are a couple of things you can do in order to minimize your chances of getting involved in one.

Here are some tips on how to avoid chargebacks on PayPal:

  • High value transactions should have matching billing and shipping addresses. It’s not a deal breaker if they don’t, but it’s a red flag for sure.
  • Be vigilant! Fully authenticate rush shipments and never accept partial- or over-payments. Anything out of the ordinary should be considered a red flag and investigated thoroughly.
  • Use the PayPal Seller Protection Program; it is your friend!
  • Block problematic customers who frequently ask for chargebacks and file claims, as they are most probably scammers.
  • Insist on signature confirmation on delivery.

If you’re running an e-commerce business and are struggling to fight against fraudulent activities, don’t hesitate to give us a call, and we will be more than happy to help you. In case you’re interested in learning more about scams, payment processors, and other business-related nuances, read our other articles!