how PayPal’s dispute rate works and when it is applied:

1. When the Dispute Rate is Applied

PayPal applies the dispute rate when determining whether a merchant (seller) may be subject to additional fees or monitoring due to a high number of disputes. Specifically:

• If your dispute rate is 1.5% or higher over the past three months, and

• You had more than 100 sales transactions during that same period,

PayPal may apply higher fees or review your account more closely.

Disputes counted toward this rate include:

• Buyer-initiated disputes for "Item Not Received" or "Item Not as Described."

• Chargebacks filed with the card issuer.

• Claims escalated through PayPal’s Resolution Center.

(PayPal Official Reference)

2. How the Dispute Rate is Calculated

The dispute rate is calculated using this formula:

$Dispute\; Rate\; (\%)=Total\; Number\; of\; Transactions\; in\; Last\; 3\; MonthsNumber\; of\; Disputed\; Transactions\; in\; Last\; 3\; Months\times 100$

Example:

• Total transactions in the last 3 months: 200

• Disputed transactions in the last 3 months: 5

$Dispute\; Rate=2005\times 100=2.5\%$

Since 2.5% > 1.5%, the seller would exceed PayPal’s threshold and could face higher dispute fees or account monitoring.

3. Notes

• Dispute rate applies only to sellers/merchants, not personal accounts.

• Maintaining good communication, accurate listings, and timely shipping helps reduce disputes and keep your rate low.

• If a dispute is resolved in your favor, it may still count toward the dispute rate, but the fee for that dispute may be waived.