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We shop online more than ever. Recent figures suggest that one in three of all purchases are now made via the web, with US-based consumers expected to spend $398.78 billion online in 2015 alone.

It’s a trend that’s not going to slow down. Experts predict that online sales in Europe will grow a staggering 18.4 percent in 2016, with the United States not far behind at 13.8 percent growth.

With the explosion in online shopping, it should come as no surprise that countless online payment services Making Online Payments - 5 PayPal Alternatives to Consider Making Online Payments - 5 PayPal Alternatives to Consider Is PayPal the best and most secure method of making online payments? We look at 5 PayPal alternatives that you should consider. Read More have popped up. PayPal was arguably the original, but it now faces stiff competition from all quarters.

As a result, PayPal has had to branch out and offer new services. One such service is the recently rebranded “PayPal Credit“.

What is PayPal Credit?

PayPal Credit – formerly called “Bill Me Later” – is best described as a virtual credit card. It’s paper-less and card-less, and since the rebrand it’s built directly into your PayPal Wallet.


It’s the integration into PayPal Wallet 8 Things You Probably Didn't Know About Digital Wallets 8 Things You Probably Didn't Know About Digital Wallets Digital wallets are billed in most tech circles as the future of real-world payment technologies. Read More that the firm hopes will entice new users. That means you can manage your payments, view your balance, and check your statements through your existing login.

In a recent interview, Steve Allocca (PayPal’s Vice President of Credit) said that “the changes are part of the company’s larger efforts to bring credit more to the center of PayPal”, and that the company’s figures showed that “[consumer] spending goes up 30 percent after a customer adopts a PayPal credit vehicle”.

The service has actually been under the PayPal umbrella since 2008 when the company bought it from I4 Commerce, but it sat as a relatively dormant and underused feature until its rebrand in the middle of last year.

On the surface it works like a traditional credit card; you make a purchase on the card and either pay off any balances immediately or spread the costs over several months – but that’s where the major similarities end.

What Makes It Different to a Traditional Credit Card?

The biggest difference between PayPal Credit and a bank-issued credit card is how it affects your credit score How to Improve and Monitor Your Credit Score by Using Technology How to Improve and Monitor Your Credit Score by Using Technology Your credit score can have a huge influence on your financial life. We explain how it's calculated and and how you can improve it. Read More .

The initial setup is the same; PayPal will make a hard inquiry on your credit report, which may temporarily lower your credit score by a few points.

Thereafter, PayPal will never report any activity to the credit bureaus. This means if you’re late with a payment 3 Tips to Beat the Debt Collectors When Facing Bankruptcy (Or Late With Bills) 3 Tips to Beat the Debt Collectors When Facing Bankruptcy (Or Late With Bills) Serious financial problems are among the most stressful situations a person can encounter. Follow these tips to let technology take away some of the burden. Read More or default on a balance completely it will not affect your credit score in a negative way. On the flip-side, if you’re a good customer and make all payments on time you won’t see any benefit in your score.

Beware, just because it won’t affect your credit score doesn’t mean it won’t affect you in other ways – PayPal will charge you up to $25 the first time you’re late, and up to $35 each time thereafter. Debt can build up quickly How to Get Rich: The Fastest Way to Get Out of Debt How to Get Rich: The Fastest Way to Get Out of Debt Imagine being debt free. No overdrawn balances or unpaid bills. There is a foolproof way of getting yourself out of debt. It starts with a plan and some discipline. Let's visit the other ingredients. Read More , and it’s not easy to shake off.

It’s also worth noting that PayPal won’t offer you any of the typical rewards that normally go hand-in-hand with credit card usage – think air miles, reward points, or cash-back deals. Instead, it’ll offer you promotional offers such as reduced interest rates or interest-free rates on certain purchases when you’re checking out of an online store.

The standard APR is 19.99 percent, which is slightly higher than most high street cards (though some “preferred customer” cards can see rates as low as 6 percent). Your credit limit will be at least $250, and you may even get a $10 sign-up bonus.

Where Can You Spend It?

You can use PayPal Credit at almost any store that accepts standard PayPal payments How To Pay With Your PayPal Balance On Sites That Don't Accept It How To Pay With Your PayPal Balance On Sites That Don't Accept It There are a whole lot of places to shop online that don't seem to be as crazy about PayPal. Here's a little maneuver you can use on sites that don't accept PayPal Read More , including eBay (though you cannot use it for purchases that fall into the categories of adult, digital goods, weapons, alcohol, and vehicles).

Some companies have a PayPal Credit option on their checkout screen, others don’t. If you don’t see the option it doesn’t mean you can’t use the service – as long as PayPal is accepted, PayPal Credit will also be accepted.

If you don’t see it on the initial checkout page, just choose to pay by PayPal, then select PayPal Credit as your payment method on the next page.

If you don’t already have an account you can apply for one at the time of checkout. You’ll be asked to provide your date of birth and the last 4 digits of your Social Security number, and then to accept the terms of service. A decision on your application will be made almost instantly.

Payments on your balance can either be made from your PayPal balance or directly from your bank.


PayPal offers “zero fraud liability” protection, which is the same protection that is offered by most major credit cards.

In practice, it means you cannot be held liable for unauthorized charges, and if someone hacks your account and goes on a spending spree you are guaranteed to get all of your money back.

Would You Use A PayPal Credit Card?

Have you used PayPal Credit? Would you use PayPal Credit? What do you think are the pros and the cons of PayPal Credit?

Is this the future of credit cards, or should lines of credit be avoided at all cost for discretionary items?

As ever, we’d love to hear your thoughts and feedback. You can let us know your opinions in the comments section below.

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