PayPal Purchase Protection

PayPal Purchase Protection: How It Works and When to Use It

Online shopping has never been more popular.

According to Statista, US eCommerce sales topped $469 billion in 2021. That’s up from $431.6 billion in 2020; roughly a 9% YoY increase. Despite their growing acceptance, however, many consumers remain skeptical about the safety of online transactions.

Of course, most online monetary exchanges are legitimate and safe. But, if a consumer is still unconvinced, a “money-back” guarantee might be a deciding factor. That’s one of the motives behind the PayPal Purchase Protection program.

PayPal says the program lets users “shop with confidence.” But does PayPal Purchase Protection live up to the hype?

In this post, we’ll examine what this program is and how it’s used. We’ll also determine what it does–and doesn’t–cover, and see what you can do about purchases not covered by a PayPal buyer protection program.

What Is PayPal Purchase Protection?

PayPal Purchase Protection

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PayPal Purchase Protection is a program offered by PayPal designed to defend users against fraud. If a user is the victim of abuse, and the transaction in question qualifies for Purchase Protection, that buyer may be covered for the full purchase price, plus the cost of fees like shipping charges.

PayPal is one of the world’s largest digital payment platforms. The company boasts over 426 million active users. They processed 5.3 billion payment transactions in Q4 of 2021 alone.

By connecting a user’s credit card or bank account to an “electronic wallet,” the company provides a safe, alternative way to shop or transfer funds online. That said, transactions can still go awry.

PayPal Purchase Protection–sometimes referred to as PayPal Buyer Protection–is a recourse for users if an order isn’t delivered, or is significantly different than described. It lets you recover money in the event that you become the victim of merchant abuse. Put another way: if the merchant won’t refund you, then PayPal might.

There is no fee for PayPal Purchase Protection. The company also has a Seller Protection program, but the two aren’t really related.

How Does the PayPal Purchase Protection Work?

Filing a dispute with PayPal implies you feel you’ve been cheated in some way by a seller. You’re asking PayPal to step in and help resolve the issue.

For instance, let’s say an item you ordered either never arrives, or is significantly different from what was promised. You contact the seller, but they refuse to help. If you made the purchase through PayPal, you can contact the company to request your money back.

If you win the dispute, the money will be taken from the seller’s account and refunded to you. Simple as that.

Online merchants may notice that this sounds very similar to a credit card chargeback. The two processes are closely related. But, as we’ll see later, there are some key differences.

A PayPal dispute is generally faster, but is more limited in scope. This is something consumers need to be aware of, right from the start.

How Much Does PayPal Purchase Protection Cover?

According to PayPal:

If you don't receive the item that you ordered, or it shows up significantly different from its description, you may qualify for Purchase Protection, and we'll reimburse you for the full purchase price plus any original shipping costs, subject to terms and limitations.

PayPal Purchase Protection guidelines

At first glance, that seems like a great deal. Having buyer protection adds a lot of value to PayPal’s services.

Look closely, however, and you’ll see a few caveats. There are two key words in that statement: if and may.

That’s not unusual. After all, most legal terms spell out limitations. But you should understand the practical implications of these terms and conditions before you buy.

We should also note that you can reverse an unauthorized transaction made through your PayPal account. However, those cases don’t fall under the purview of the Purchase Protection program. Also, if a criminal makes a fraudulent purchase using your card, and you’re unable to resolve the issue through the merchant, you should contact the bank to file a chargeback.

The PayPal Purchase Protection Process

To dispute a charge, you must  have an existing PayPal account in good standing. Also, the purchase in question must have been paid for through that account. Both of those rules make perfect sense.

So what kind of transaction qualifies? There are only two situations that may be eligible:

• Item Not Received: You didn’t receive the product from seller.
• Significantly Not as Described: You received the product, but it differed from what you ordered.

If you do have a qualifying transaction, you’ll need to make a claim via the PayPal Resolution Center within 180 calendar days of making the payment.

You’re required to contact the seller and attempt to resolve the dispute directly before involving PayPal, though. You can do this through the Resolution Center; simply log in, locate the transaction in question, and choose “Contact Seller.”

If you and the seller can’t reach an agreement, you have the option of escalating the dispute to a claim. This must be done within 20 days of filing it, or PayPal will automatically close the dispute.

Once the case has been escalated, you may be asked to provide evidence, which you should do as quickly as requested. You may also be required to return the disputed item to the seller.

The overall process looks something like this:

At this point, you’ve done your part. The rest is up to PayPal. As they put it, the company will determine “...in its sole discretion, whether your claim is eligible for the PayPal Purchase Protection program.”

In other words, PayPal will make a judgement call. This may–or may not–be in your favor. Even if you think you have an iron-clad case, PayPal may see it differently.

Understanding PayPal Purchase Protection Claim Parameters

As we mentioned, there are only two scenarios where Purchase Protection for buyers comes into play.

If merchandise you purchased was never delivered, PayPal will typically go to the seller for proof of delivery. If the seller can produce compelling evidence, such as a signature on delivery, you’re probably out of luck.

“Not as Described” cases can be a little trickier. You’re either saying what you received was defective, damaged, or a counterfeit, or that you didn’t get everything you ordered. This can also apply to certain intangible items, such as a digital file that you are unable to download.

In these situations, PayPal may ask you to prove your case. A claim for a damaged item, for example, might need pictures of the original damaged package. A counterfeit item case may require documentation from a credentialed professional, certifying the item is fake. Depending on the cost of the original item, some cases may not be worth the time and trouble of disputing.

What is Not Covered by PayPal Purchase Protection?

Even if a transaction fits all the other eligibility requirements, it may not be covered under PayPal Purchase Protection. There are a number of product categories and purchase types that are excluded, including:

• Real estate
• Motorized vehicles
• Custom-made goods
• Industrial machinery
• Prepaid cards (phone cards, gift cards, etc.)
• Items that violate PayPal policies
• Card-present purchases
• Sending money to friends or family
• Disputes filed beyond the allotted time frame
• Items that were described accurately by the seller
• Items the seller can prove were delivered
• Services the seller can prove were used
• Donations (including crowdfunding)

For a complete current list of non-covered transactions, visit PayPal’s Dispute Page.

What If My Claim Is Not Covered by PayPal Purchase Protection?

Well, you have a couple of options.

First, if PayPal decides in the seller’s favor, you may be able to appeal the decision by submitting new or additional evidence. Whether or not you can do this is up to PayPal. And, even if they accept additional evidence, they could still reject your appeal after looking it over.

If that doesn’t work, you can consider filing a chargeback.

All major card networks offer consumers a chargeback option. This allows cardholders to dispute charges they feel are invalid or unfair. For the most part, chargebacks can be filed for any of the reasons PayPal allows, plus a few more.

The steps for filing a credit card chargeback are much the same as filing a claim with PayPal. You’ll need to try resolving the issue directly before filing. You must provide evidence, and you’ll be under similar time constraints. And, like a PayPal dispute, your money is refunded if you win.

Why PayPal Purchase Protection is a Better Option

So why not go with a chargeback in the first place? Well, there are a few reasons.

First, a chargeback should always be thought of as a last resort. You should only go this route after every other avenue has been tried. That’s what the chargeback system was designed for.

On a more practical level, PayPal disputes are less complex. You can access everything–even the seller–right through your PayPal account. Bank chargebacks, on the other hand, tend to be more involved. They require more and deeper communications with the seller and the issuing bank.

A chargeback will also take longer than a dispute. If the bank doesn’t reject your claim in a timely manner, you may miss the deadline to try again by filing a PayPal dispute.

In contrast, let’s say you start with a PayPal dispute, but it gets denied. In most cases, you’ll still have time to file a bank chargeback. In fact, PayPal terms openly state that if they reject your claim, you can pursue the dispute with your card issuer later.

Of course, there’s still a chance PayPal will take too long to deny your claim. If that happens, and you’re unable to meet the bank’s chargeback time limits because PayPal took too long, they will reimburse you outright:

“...if, because of our delay, you recover less than the full amount you would have been entitled to recover from the card issuer, we will reimburse you for the remainder of your loss (minus any amount you have already recovered from the seller or your card issuer).”

PayPal Purchase Protection guidelines

Bottom line: if your transaction is eligible for PayPal Purchase Protection, you’re almost always better off starting there. You can always talk to the bank later. Just don’t try to do both at the same time, as that is likely to get both claims cancelled.