5 PayPal Chargeback Scams & How to Prevent Them

payment processes

PayPal has a reputation for safety and security, which makes them the first choice for many ecommerce businesses who need to have a way to accept online payments.

Unfortunately, fraud and criminal activities do still occur on PayPal. Any merchant who regularly transacts business over PayPal should be aware of these five common scams.

Shipping Address

After a purchase is made and the payment has been placed in the seller’s PayPal account, the scammer asks the seller to ship their purchased item to an invalid delivery address.

After several failed delivery attempts, the shipping company flags the item as undeliverable in their system. The scammer then contacts the shipping company and gives them a new, valid shipping address.

When the scammer gets their shipment, they file a complaint with PayPal claiming that the item was never delivered. The seller has no proof of delivery, because their transaction detail shows only the original, invalid address. PayPal’s Seller Protection doesn’t cover shipments made to addresses that aren’t on file, so the seller loses both the item they shipped and the payment funds.


Sometimes, a scammer may make a payment to a seller’s PayPal account that exceeds the cost of the item they are purchasing.

Then they will contact the seller, explain that they overpaid, and ask for the remaining balance to be paid back to them.

After the seller sends back the overpayment amount, the scammer sends a complaint to PayPal claiming that their account was compromised and that they never meant to send a payment to the seller in the first place. PayPal reimburses the full original payment back to the scammer, and even if the seller hasn’t shipped out the purchased item yet, they’ve still lost the “overpaid” amount they sent back.

Fake Email

Scammers may send forged emails to sellers that appear to be from PayPal, stating that the scammer paid money into the seller’s account and that PayPal has placed a hold on the funds and will not release them until the seller sends a shipment tracking number.

PayPal does not work this way; they do not hold funds in escrow. The scammer is hoping that the seller will rush to ship the item and send over a tracking number in order to receive the money. Once the item has been shipped, it’s too late—the scammer will get an item that they never paid for, and the seller will eventually realize that PayPal was never holding money for them.

Phishing Email

Another fake email scam involves sending sellers an email that appears to be from PayPal indicating that funds have been transferred into their account pending confirmation, with a link or button for the seller to click that will make the money available to them.

The link leads to a fake PayPal site that will ask for the seller’s login credentials. If the seller enters their email and password into the fake site, the scammer will be able to use them to log into the seller’s actual PayPal account, from which they can make payments or withdraw funds.

Hacked PayPal

Once a scammer has hacked into somebody else’s PayPal account (as in the case of the phishing email scam), they can make purchases and send payments with the money from the account they have taken over.

A seller might receive notice of a purchase and ship an item, only to later be told by PayPal that the transaction was fraudulent and that the transaction must be reversed. PayPal may reimburse the seller if they are able to confirm that the account that made the payment was hacked.

How You Can Prevent PayPal Scams

The good news about PayPal scams is that there are several actionable steps merchants can take to prevent or avoid them.

  • Before accepting a payment, look out for red flags. Requests to rush shipments, accept partial payments, or accept payments split up between multiple PayPal accounts are all strong indicators of fraudulent activity.
  • Items that have a high resale value or are in high demand are especially attractive to fraudsters. Before shipping out especially valuable items, double check shipping and billing addresses to make sure they match.
  • Even customers with valid credentials may commit “friendly fraud” out of ignorance or impatience. When shipping high-value items, insist on signature confirmation on delivery.
  • Sign up for PayPal’s Seller Protection Program, and PayPal will monitor your transactions for signs of fraud.
  • Block customers who file disputes or make fraud claims. Fraudsters will often target the same seller several times if no action is taken against them.

Many instances of fraud happen because sellers don’t know the warning signs to watch out for. If you know what to look for, you can exercise caution and protect yourself from scammers, thieves, and hackers.

Businesses that process ecommerce and other card-not-present transactions — including the more than 17 million who use PayPal for payments — are quickly learning about the risks and realities of chargebacks.

Suresh Dakshina is President Chargeback Gurus

16 responses to “5 PayPal Chargeback Scams & How to Prevent Them

  1. Suresh, thank you for posting this informative article. Have you heard of this additional issue?:
    I recently had a person text me (different times, from two different phone numbers) trying to get me to agree to accept a paypal payment for the furniture item he wanted to purchase from me. This ‘buyer’ want to add more $ to cover a moving company that he would arrange to come pick up the furniture item. and he wanted me to pay the mover in cash from those additional funds. In order to protect myself from fraud, I refused to make the deal Luckily, my son warned me that the movers could claim that they never picked up the item or received the cash, and then the buyer could dispute the paypal payment for never having received it. I’d be left with no item and no payment.

    1. THESE “scammers”, wake up EVERYDAY and do this… as though it’s a “job”… And when somehow rule changes (regulations/laws) prevent it from being possible anymore, do they go and get a REAL job? NO! They spend their time, not even making a new scam, but looking for some scam SOMEONE ELSE IS DOING (they’re THAT lazy) then do the same…. because you know, that’s a “job” to them.

      When these people are found, they deserve 30 (THIRTY) years in jail…. Why? Because it UNDERMINES TRUST, and that’s the basis of EVERYTHING that society is built upon!!!!

      No “trust”= NO SOCIETY!!!!!!!!!!!

      1. lol… 30 years is super ridiculous but paypal at least should offer legitimate appeal options for people instead of what is currently going on.

  2. Actually the correct approach is not to use PayPal. To have nothing whatsoever to do with them. It is a dreadful company that treats sellers and buyers alike with disrespect, if not outright contempt. What is needed is for millions to close their accounts and put Paypal out of business.

    1. Well said @tom@disqus_jUyq7L0KxI:disqus . I reported back a fraud (the story in itself will take a new post) and what they did was to go with the other party and make them win. Now, the dispute was converted into a claim and any balance that comes into my account will be deducted until i fully pay the entire claim amount. Paypal just fuel these scammers.

  3. I am dumping them too. I had a virus which installed a remote login and they bought items using my computer remotely. I have log files which show this time stamped at the exact time of the fraudulent purchase. They won’t even look at it. To add to the problem they do not sever accounts which are linked when asked. I did that a while back and low and behold the accounts were still linked. Then after one intrusion they are dragging their feet on and blaming me for having my info stolen. I decided to remove any payment methods and after one week from the first hack they charged a $700 dollar item but the only card on my account had been deactivated by my bank, Thank God. The only real protection they offer is to sellers which end up being the real scammers. If they were serious about stopping fraud they would use a 2 step verification process for purchases like all serious about security businesses do. Then they immediately charge your account, like in minutes giving you no time to alert them to the fraud.

    After over 20 years I am done with them.

  4. PayPal scammers make millions. Here’s how. Sammers advertise a tv for sale for $95 (a two year old model so its plausible). Payments are made to scammers paypal merchant account. Scammer sends an empty envelope with tracking number to a different address but with the same zip. The buyer tracks the package by usps it shows as delivered. Buyer submits a claim to PayPal the merchant (scammer) submits the tracking number as delivered. PayPal closes the case. Buyer is out the money. Buyer may assume the tv was stolen as it shows as delivered. If the buyer is lucky he can as a sympathetic postmaster to check the address to find out an envelope not a tv with the same tracking number was delivered to another address. PayPal says get a letter from USPS to that regard. Buyer goes back to USPS to find out that they can’t give you that information for privacy reasons. Scammer keeps the money. PayPal is complicit and makes their transaction % and the buyer is SOL. Great scam. Why would anyone work for a living when scamming is this easy. You just need no morals and paypal. I was scammed. Shame on PayPal.

    1. Just experienced the identical scam. USPS tracking does not show address and PayPal is unwilling to force scammer (Jamaica, NY) to disclose actual delivery address documentation. Local USPS was kind enough to to mail actual “full” tracking info to me. Clearly exposed the scam . . . all for the price of a First Class stamp. The real problem is payPal. You cannot “Appeal” their decision, even though the site says you can. They have deliberately convoluted their links, such that you go on a never-ending carousel ride, that always ends up back where you started (Resolution Center/Contact Us/Help). Who told you to “get a letter” and where were you supposed to send it? I can’t find a way to upload or mail the USPS documentation I have. Thanks in advance.

    2. Follow-up: The key is to get a “detailed” USPS tracking document. My local person was friendly. I started online (USPS) and she called me a few hours later. She had their USPS Tracking Intranet report in hand. The three page report showed what it was (First Class envelope 8 oz and not my grill), delivered to this address (not mine) etc. etc.. Got a hard copy in the mail next day. Long story short: Finally found a way to get an appeal going (through Messaging/then transfer to Agent, then Agent forwarded me to Dispute Dept), and then uploaded the USPS report all along the way. Once they reviewed it was pretty straight-forward. Refund was issued immediately ($83). With me, I got cooperation from USPS but the PayPal “How to Appeal” part was very difficult because of their web pages. But you have to have the USPS documentation. This all took a week after the unfavorable decision. And I had emailed the seller twice to no avail. Even included the USPS report the second time, and gave him 48 hours to refund. NADA. But you gotta wonder? How many people will go that far to make it right? It’s really not even about the money. I gave PayPal a minor blast in the Feedback Follow-up Form they asked I fill out. Told them their “investigation” is severely lacking. PayPal simply cannot rely on an online USPS Tracking system, that does not show what shipped and to what house number. This scammer is probably making a pile of money because of a loosey-goosey tracking system, that PayPal is basing their Dispute decisions on. Shame. Sorry for the length.

  5. I am a seller. I have had a buyer dispute. The dispute was a chargeback initiated through the customers bank. The dispute simply stated ‘item not as described.’ I responded through Paypal that the items purchased were as described, and as pictured on my website (of 17 years), and packed by myself. I further stated that I would be happy to refund the purchase upon receipt of the items. Paypal status, waiting for response. Yesterday I got an email from Paypal stating the following: “After our efforts to resolve this dispute on your behalf, your buyer’s financial institution decided in the buyer’s favor. While we cannot dispute this transaction any further, we encourage you to contact your buyer directly to reach a resolution. (WTF!? Nothing returned, no recourse, Paypal lets chargeback happen!?)

  6. I sold something on ebay, and the buyer said his paypal was hacked and he didnt make the purchase so I refunded him. Paypal refused to wave their charges. They are profiting over fraud on their own network.

  7. Paypal customer services themselves scam the clients guys… So do the customer services officially located in Luxembourg but represented in European countries that I know too well. Do you really think that Paypal would still exist if it was external scammers using it?? They would have closed already. But it is soooo convenient to make people believe that it is coming from the outside AND they have no alternative able to stand… It is a casuality? Who are they protected by to be able to still have the leader seat and have so many scam complains? Certainly by the highest bankers, no? I am scammed by Paypal itself for months to get my money back…

  8. My company just recovered over $824,000 that was lost to some online scammers all thanks to this pro hacker wisetechhacker from United kingdom. I promised to paste his contact all over the net so if you need help, contact Wise Tech on his EMAIL- (wisetechhacker @ gmail com) OR WhatsApp +1 (424) 283 6238 .He rendered me a personal service of cloning and entire cellphone within 12hours, I could monitor the entire phone on my computer. He offers many other services.

  9. I know this “news” is pretty old but it would be good to get it around to as many who will read it. I’ve been scammed 3 times lately . All of $30 each and we burst into laughter when finally got the product.
    Like ordering electric paint spay gun & getting a $2 paint roller. Or a jet propelled surfboard ( ordered as a joke anyway as the the thing was made in the USA for $4000 & then on wish $29.95) only to get 2 x 2ft long kids inflatables with cute dolphins & mermaids on the –and pink for my teenage boys). Serious side is they get away with $30 or offer a discount to settle and keep the balance to the tune of millions of $ per week! Why didn’t we think about that. The future is on-line sales with drone delivery. It needs regulations unfortunately as some cultures do this asd a norm and to survive .

  10. paypal is trash don’t use it if you don’t want to get scammed, i’ve never been scammed in my entire life except for paypal. Making transaction i never approved and now they tell me i can’t get my money back even when the seller cancelled all the orders …….

Leave a Reply