What is an Overpayment Scam?Beware Buyers Who Try to Pay Extra. In Most Cases, It’s a Scam.
What is an Overpayment Scam? Definitions & Overview
Everybody likes bonuses and tips. Unfortunately, as eCommerce merchants, these payments are rare to nonexistent. After all, you’re selling goods and services online in a largely low-touch, self-serve environment; it would make little sense for buyers to tip for good service.
That doesn’t stop illegitimate buyers from trying, though.
In overpayment scams, bad actors use stolen credit cards to fund invalid purchases. There, they intentionally pay more in the hopes that you’ll refund the difference as cash. When the actual cardholder inevitably discovers the fraud, you’ll lose out on the entire sale and the inventory you shipped. Plus, you’ll incur fees and other penalties.
In this article, I introduce you to overpayment scams, providing a definition and overview of the topic.
Overpayment Scams
What should you do when a customer wants to pay more than your listed price for goods or services? This question might seem to have a simple answer, but there's a reason why overpayment scams are a favorite method for fraudsters. This guide explores everything you need to know on the topic: what overpayment scams are, why they’re a bad deal, and how best to fight them.
What is an Overpayment Scam?
- Overpayment Scam
Most of the time, overpayment scams revolve around someone overpaying for an item using a stolen credit card, check, or money order. The buyer arranges the return of the overage through a third account, then disappears. The aim is to convert the available account balance or credit line to liquid cash.
[noun]/Ōvər • pā • mənt • skam/
An overpayment scam refers to a cash forwarding or advance payment fraud tactic. Fraudsters will use stolen credit card details to initiate a transaction, then offer to overpay the total amount due. Once the overage has been agreed to, the fraudster will request the overage be returned to a different payment account or another third-party source.
Once the legitimate accountholder discovers the fraud, they will file a chargeback, leaving the seller holding the bag for the losses.
Who’s Most at Risk for Overpayment Scams?
While overpayment scammers can target any business, certain industries face disproportionate risk.
Heavy equipment dealers, luxury goods sellers, and anyone operating through online marketplaces like Craigslist or Facebook Marketplace should stay vigilant. These channels lack the built-in fraud protections of established ecommerce platforms, leaving sellers more exposed to overpayment schemes.
Other common targets include:
The Connection Between Overpayment Scams & Chargebacks
When a scammer uses a stolen credit card to execute an overpayment scheme, the legitimate cardholder eventually notices the unauthorized charge and files a dispute. By this point, you’ve already shipped the product and refunded the “overpayment” to the scammer. The resulting chargeback means the merchant loses the transaction amount, the merchandise, any refunded overpayment, and pays a chargeback fee. It’s a devastating quadruple loss.
Even if you think you have grounds to submit a response, these chargebacks are particularly difficult to fight. Documentation gets murky, and explaining the overpayment scheme to the issuing bank adds complexity to an already challenging dispute process.
These incidents contribute to your overall chargeback ratio, too. Multiple overpayment-related chargebacks can push you into a chargeback monitoring program, trigger higher processing fees, or even result in account termination. The initial scam thus creates cascading consequences that extend far beyond the immediate financial loss.
