4 TikTok Shop Payment Policies Every Seller Should Know

In this article, learn about: 

• How TikTok Shop defines and processes chargebacks for U.S. sellers 

• Settlement timelines and how performance impacts payout speed 

• Negative balance thresholds and associated enforcement actions 

• How reserve funds work and what determines reserve levels 

TikTok Shop is an increasingly popular shopping platform, offering TikTok users the ease of ordering products while scrolling on social media. This low-effort, scroll-to-shop method creates major revenue opportunities for sellers. However, with significant sales comes increased pressure to meet high order volume while staying compliant with all of TikTok Shop’s seller policies.  

In this article, we break down four TikTok Shop payment policies that every seller should know, including chargebacks, dynamic settlements, negative balances, and reserve policies. 

Related Reading: TikTok Shop: How to Prepare for Viral Demand 

Chargeback Policy 

For TikTok Shop sellers in the United States, a chargeback occurs when a customer initiates a transaction dispute and requests a refund from their financial institution. This is quite different from how retailers like Walmart and Target classify chargebacks, where a “chargeback” typically refers to a retailer-initiated deduction tied to compliance issues, such as late shipments or missing documentation. 

There are several possible reasons why a customer may file a chargeback, such as not receiving the order, being billed the wrong amount, getting duplicate charges, or even their card being used in error. Regardless of the situation, sellers should respond promptly to TikTok Shop when chargebacks occur.  

Here’s how the line of communication works when a customer initiates a chargeback:  

1. TikTok Shop's third-party payment processor will contact TikTok Shop for details 

2. TikTok Shop notifies seller in Seller Center for additional information 

3. Seller submits required documentation 

4. TikTok Shop will review submitted documentation and submit to the cardholder’s financial institution 

It should be noted that it is not free to appeal chargebacks. Because TikTok Shop appeals the chargeback on behalf of the seller, there is a $10 fee per chargeback, regardless of the appeal outcome. However, if the seller provides documentation and the chargeback is marked as “unauthorized payment,” the seller will not be charged the $10 fee or the chargeback amount. 

How to Appeal a TikTok Shop Chargeback 

Chargebacks require active monitoring and quick responses. Sellers have seven calendar days from the chargeback notification to submit an appeal. The exact deadline can be found in the chargeback notification.  

Required information to submit appeal: 

• Transaction status 

• Product description 

• Proof that the customer received the item 

Optional information to submit appeal: 

• Order confirmations 

• Details for any changes, refunds, or cancellations that occurred 

• Shipment tracking numbers 

• Product images 

• Customer communications 

If the seller fails to provide adequate appeal documentation, or if the cardholder’s financial institution sides with the customer, the seller will be charged the cost of the chargeback. Appeals can take up to 90 days to process; sellers will be notified of the results in Seller Center. 

In some cases, if the seller misses the appeal deadline or chooses to ignore it, TikTok Shop reserves the right to appeal the chargeback on behalf of the seller. If this happens, the seller is not charged the $10 fee.  

Best Practices for Avoiding Chargebacks 

To reduce dealing with chargebacks in the first place, sellers should develop best practices for their operations, such as:  

• Accurate item data: Ensure product listings clearly reflect what the customer will receive, using detailed visuals and precise product information. 

• Prompt customer communication: Address customer questions or issues quickly and offer solutions when something goes wrong. Keep buyers informed if an order is delayed or requires follow-up. 

• Clear policies and expectations: Make return and refund terms easy to find and understand to reduce confusion after purchase. 

• Reliable fulfillment and packaging: Process and ship orders quickly once payment is confirmed. Use packaging that minimizes the risk of damage during delivery. 

Dynamic Settlement Policy 

The Dynamic Settlement Policy covers requirements for sellers to meet in order to be able to do expedited settlements on TikTok Shop. Settlements is the process of TikTok Shop releasing funds from completed orders to a seller after delivery is confirmed. All sellers must comply with this policy. 

The standard settlement timeframe is 7 days after an order is delivered. However, strong performance metrics can mean faster settlements, which is where the dynamic settlement policy comes in. Better performance can mean quicker settlement times, and conversely, poor performance can translate to longer settlement times.  

Settlement periods for sellers are tier-based, and each seller will fall into one of the following five tiers:  

Negative Balance Policy 

TikTok Shop’s Negative Balance Policy requires that sellers never have an account balance below zero dollars. Failure to comply with this policy can result in a variety of corrective actions, depending on the severity of the negative balance:  

• Balances from below $0 to -$249: Seller receives a warning ticket to resolve the balance.  

• Balances from -$250 to -$499: Seller receives a violation ticket that prevents the seller from creating new promotions. 

• Balances from -$500 and greater: Seller receives a violation ticket that prevents the seller from creating new promotions and participating in TikTok Shop campaigns.  

There is also a possibility that TikTok Shop enforces other penalties, referred to as Enforcement Actions, for a negative balance. These can include deferred settlements, fund deductions, withholding balances, and even account deactivation.  

Sellers can resolve the corrective actions listed above by resolving their negative balance.  

How to Prevent a Negative TikTok Shop Balance 

The primary way to avoid a negative TikTok Shop balance is to keep a payment method on file with TikTok shop. TikTok Shop only accepts credit cards. In addition, the credit card must have a valid U.S.-based billing address. Payment methods can be added or updated by the shop owner.  

Reserve Policy 

Reserve funds are a policy used to shield TikTok Shop from the potential risks of sellers not having enough funds to cover things like disputes, refunds, and other fees.  

This policy applies to all U.S. sellers that use: 

• Ship by TikTok 

• Ship by Seller 

• Fulfilled by TikTok 

How TikTok Shop Reserve Funds Work 

TikTok Shop calculates a percentage of each settlement and holds the amount for a certain period of time. These funds are held to cover potential fees, but if they go unused, they can be disbursed back to the seller after the reserve period has ended.  

There are different reserve levels that dictate how what percentage of funds will be held: 

 
The reserve level that sellers are in depends on what criteria their account meets, which is tied to their seller performance:  

• Level 0 criteria: Outstanding dispute amount is 85% of the reserve funds and/or TikTok Shop determines the seller is high risk. 

• Level 1 criteria: Seller is on probation, their Late Dispatch Rate is greater than 8%, and/or their Fault Cancellation Rate is greater than 5%. 

• Level 2 criteria: The seller’s Fault Cancellation rate is greater than 2.5% but less than/equal to 5%, and/or their Late Dispatch Rate is greater than 4% but less than/equal to 8%. 

• Level 3 criteria: Sellers are out of probation, their Fault Cancellation Rate is less than/equal to 2.5%, and their Late Dispatch Rate is less than/equal to 4%.  

All new sellers are automatically placed in a probation period and fall into Reserve Level 1. After probation, seller levels are then determined by their performance.  

TikTok Shop evaluates reserve levels at the start of each month, so there’s a potential for sellers to frequently switch levels based on their performance. For sellers to receive as much of their settlement as possible each month, it’s important that they consistently meet TikTok Shop’s operational and compliance requirements. 

Take Control with Better Data 

Navigating retailer expectations and standards can be complex. End-to-end visibility into your supply chain helps you identify risks early, improve performance, and stay agile as requirements change.  
 
SPS Analytics gives you the complete data picture you need to monitor trends, spot issues quickly, and make informed decisions—before problems impact your business.