Paypal now keep their fee when you refund a customer

We're just setting up the Paypal API for a new client, and have found a change since we last did it just a few weeks ago!

It seems that in September 2011, the UK terms for Paypal updated to say that Paypal now keep the fixed part of their fee when you refund a customer.

Paypal charges UK business account holders from 3.4% (depending on your level of transactions) and 20p per purchase.

It's always been the case that if you then need to refund the customer for any reason, they'll give you everything back, so you're no worse off than if the transaction had never happened (financially - time wise it might have taken some faffing and customer service!). However now, they'll keep the fixed part of their fee - the 20p.

So OK, if you sell lots of big things and you make a good living, then what's 20p for the odd occasion a customer changes their mind? Well, yeah, it's not too much if it happens once in a blue moon but it does still mean than a refund is actually costing your business money. 

It also means anyone who has to issue lots of refunds should consider why they are - are they misrepresnting their goods online so people aren't happy when they receive them? Are they marketing to the wrong audience? If this change of Paypal's terms is a big problem for you then you need to ask why it is, and maybe tweak something your end so that it doesn't occur so often.

The reason we came across it was for testing. Paypal has a sandbox development option, but there are times when you just want to do actual thorough live testing, or you're retracing a customer's steps because they reported an issue. And in those instances our client has always been able to refund us anything we've paid them in a test transaction and no one has been out of pocket. But now it will cost our client 20p each time we, or they, do a test.

So just beware - if you've been used to Paypal refunds not costing you anything, remember that they do now!