Paddle receives two types of events regarding chargebacks: Chargebacks and Pre-Chargeback Alerts. This document explains each type of event, their differences, and how they are managed.

What Are Chargebacks?

Chargebacks occur when a buyer disputes a charge with their card-issuing bank or PayPal. This can happen for several reasons, including but not limited to:

- Fraudulent transactions

- Unrecognized charges

- Canceling recurring billing

- Unsatisfactory product/not as described

- Refund not issued

Chargebacks are a common part of online payments, especially in software transactions. Resolving issues early can help avoid chargebacks; for example, offering refunds to dissatisfied buyers may prevent disputes.

Chargeback Rates

Keeping your chargeback rate low is critical for maintaining a good standing with Paddle and card payment networks. Paddle calculates chargeback rates by comparing the total dollar value of chargebacks received against your total transaction volume for a given month. This method provides a clearer understanding of their impact on your account.

- Acceptable Chargeback Rate: Below 0.65% of transaction volume.

If your chargeback rate exceeds 0.65%, Paddle may require changes to your processes to bring the rate down. This will always be done collaboratively with our Risk Team, and any changes to your account will be communicated in advance.

To reduce chargeback rates, consult the Best Practices section in our Seller Handbook and our blog post on chargebacks.

Paddle’s Defence System

When a chargeback is received, Paddle’s Dispute Defence System gathers the necessary documentation to contest the chargeback. This documentation, referred to as evidence, may include communication with the buyer, subscription payment history, and proof of authorization for the purchase.

The system is fully automated, and additional evidence submitted by sellers is not required or accepted.

Chargeback Fees:

- Card payments: $15/£15/€15

- PayPal transactions: $20/£20/€20

When a chargeback is received, the chargeback fee and the disputed transaction amount are deducted from your Paddle balance. If the dispute is resolved in your favor, both the original transaction amount and the fee are refunded.

What Are Pre-Chargeback Alerts?

Pre-Chargeback Alerts are notifications of potential disputes before they escalate into formal chargebacks. They allow for proactive resolution and help maintain an acceptable chargeback rate.

Key Benefits of Pre-Chargeback Alerts:

- Allow refunds to be issued before a chargeback is filed, preventing an impact on your chargeback rate.

- Enable immediate revocation of access for the buyer to prevent continued usage of your product.

When a Pre-Chargeback Alert is received, Paddle automatically refunds the transaction to the original payment method. A service fee is applied for each alert:

- $15/£15/€15 (deducted from your balance).

How to Identify Pre-Chargeback Alerts and Disputed Charges

Paddle proactively manages disputes to minimize their impact on your account. Here’s how we handle them:

- Pre-Chargeback Alerts: If an early-stage dispute is detected, a "chargeback_warning" adjustment is created. The disputed amount is refunded, and a service fee is applied, preventing the dispute from affecting your chargeback rate.

- Standard Chargebacks: If no early warning is received, a "chargeback" adjustment is created when the dispute occurs. This can impact your chargeback rate.

- Reversed Chargebacks: If Paddle successfully disputes a chargeback, a "chargeback_reverse" adjustment restores the refunded amount and reverts the associated fees.

For detailed information on chargeback adjustments, refer to the Developer Documentation.

In Paddle Classic (PC), you may also see an “internal chargeback” note on the order page, providing additional details about the chargeback’s status.

How We’ll Notify You About Chargebacks and Alerts

You can identify chargebacks and Pre-Chargeback Alerts in the Vendor Dashboard:

- Paddle Classic: Transactions with chargebacks or Pre-Chargeback Alerts include a note indicating the event.

- Paddle Billing: Labels specify whether the transaction is a Pre-Chargeback Alert or a standard chargeback.

For instructions on enabling notifications for disputes, visit our Help Article on notifications.