Etsy supports two versions of PayPal: integrated PayPal and standalone PayPal.
Etsy Payments allows buyers and sellers to use various forms of payments on Etsy.com, EtsyStudio.com, and Etsy's mobile apps and other services. Etsy Payments users can pay with and accept payment by credit card, debit card, Etsy gift card, Etsy Credit, some bank transfer services, PayPal, Apple Pay, Android Pay, and the Sell on Etsy Reader—all in their local currencies. This policy explains all of your rights and obligations when using Etsy Payments.
The scammer’s payment (typically a check or money order, but increasingly an electronic invoice sent via PayPal or another payment processor) is a forgery. In the case of a check, it is not real. It is only worthless paper. Your bank may allow you to deposit it, but the payment will not clear. Your bank will hold you responsible for the entire amount.
In the case of a PayPal payment, the scammer will either send a fake PayPal confirmation email or pay with a fraudulent payment source. Whether you return the “overpayment” via PayPal or a wire transfer service such as Western Union or MoneyGram, you will still be held responsible for all of the money involved.
Never trust a PayPal payment which is contingent upon you shipping the item before funds are “released” to your account, unless you are willingly using an escrow service.
The scammer will attempt to convince a seller to accept a fake payment for more than the item is worth. If they are successful, the scammer will get both the item and the money. In nearly every case, the con artist will not be caught.
You'll receive a refund of your PayPal fees based on the type and amount of the refund you issue.
If the buyer used a credit card without logging in to a PayPal account (in other words, if they used PayPal Guest Checkout), the refund will go back to their credit or debit card. It can take up to 30 days for the refund to show up on their card statement.