Dispute Fees

Dispute fees are charges that merchants or sellers incur when a buyer questions or contests a transaction, often leading to a dispute or chargeback process. These fees cover the administrative costs of managing and resolving such disputes.

Key points about dispute fees include:

• Purpose: They are charged to manage the dispute resolution process when a buyer files a claim either directly with the payment platform (like PayPal) or through their card issuer or bank.

• Application: Dispute fees apply when a buyer disputes a transaction made via a payment platform or card, often due to reasons like "Item Not Received" or "Significantly Not As Described."

• Fee Variations: The amount and type of dispute fee can vary depending on the payment processor and the merchant's dispute history. For example, PayPal charges a standard dispute fee or a high-volume dispute fee depending on the merchant's dispute ratio and sales volume over the previous three months. If the dispute ratio exceeds 1.5% and the merchant processed more than 100 sales, the higher fee applies.

• Examples from Payment Platforms:

  • PayPal: Charges a Merchant Dispute Fee for disputes on transactions completed via PayPal accounts or Guest Checkout. The fee is waived for inquiries resolved amicably or unauthorized transaction claims.
  • Stripe: Charges a dispute received fee when a cardholder initiates a dispute, plus an additional fee if the merchant chooses to contest the dispute. If the merchant wins, the contesting fee is refunded.
  • Klarna: Charges a flat dispute fee regardless of the number of disputes escalated monthly relative to the number of orders.

• Impact on Merchants: Dispute fees add to the cost of handling chargebacks and disputes, which can be financially burdensome and time-consuming for businesses.

In summary, dispute fees are administrative charges imposed on merchants to cover the costs of handling transaction disputes initiated by buyers, with fees varying by payment processor and merchant dispute history.