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I use eBay and my own site (hosted by Wix) to sell a virtual service with uses PayPal as the only payment option. Since the virtual service contains no physical item that gets dispatched, protection against fradulent claims can be quite complicated sometimes.

My main concern is that buyer's are able to chargeback on their bank account, and will 100% get their money back on PayPal with no questions asked, and I get no chance to prove myself to the bank that they are making a false chargeback. PayPal doesn't assist the seller in being able to contact the bank to deal with the chargeback directly, and only offers to payout themselves if you can provide proof that a physical item was sent to their address (which of course is impossible).

What is the best way to protect myself against bank chargebacks? Perhaps moving away from PayPal and using a payment service that allows me to directly respond to a bank chargeback, (if a service like that even exists?)

  • This is tricky in virtual goods. Even if you switch to cards etc, there would be similar issues albeit slightly more opportunity for you to fight back. One option is send the code / etc in CD. This doesn't prevent someone from reading the code and returning the item and claiming charge back ... plus puts huge shipping costs. If the cost of you virtual service is high; see if you build a license verification service that will ping periodically; if the payment is reversed, the service is withdrawn [similar to Anti Virus Software]. Else eat up this cost of charge backs by increasing the license – Dheer Jan 7 at 4:14
  • " offers to payout themselves if you can provide proof that a physical item was sent to their address (which of course is impossible)." - This seems like a good standalone question. Delivery tracking and verification are common now. Signature confirmation is available but arguably inconvenient. If you were to ask this as a separate question would it solve your problem with PayPal? – Freiheit Jan 7 at 18:35
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If the customer uses a debit card instead of a credit card then they have a limited number of business days to void a contract.

  • This question appears to be more about practical allowances and limitations on chargebacks rather than contractual ones (as the purchaser choosing to void a contract is not entitled to keep the goods, but as a practical matter the chargeback process doesn't force them to give them up) – Ben Voigt Jan 7 at 2:16
  • A debit card is usually only charged-back if the charge was unauthorized and reported to the bank as fraudulent. But if a contract is legally voided then the customer has the legal right to a refund regardless of payment method. A credit card can be charged-back for 60 days after the next bill and mostly just requires a customer's explanation of being unsatisfied to the credit card company. Certainly recommend that the consumer use a credit card in any risky situation. – S Spring Jan 7 at 4:28

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