Imagine a world in which you could shop online without ever needing to enter a credit or debit card number; the increased security alone would be a massive boon. No one could look over your shoulder in a public setting, and you wouldn’t be at risk from credit card fraud or physical theft.
Well, that’s exactly what online payment giant PayPal offers in the form of PayPal Credit.
What Is PayPal Credit?
PayPal Credit (formerly called “PayPal Bill Me Later”) is a virtual credit card. It was originally launched in 2008 but was rebranded into its current form in 2015. The service is paper-less, card-less, and built directly into your PayPal wallet.
The integration with your PayPal wallet means you can manage your payments, view your balance, and check your statements through your existing login.
Two other services—PayPal Extras MasterCard and PayPal Smart Connect Card—fall under the PayPal Credit umbrella. However, they offer a physical card so will not form part of this rundown. Learn more about the pros and cons of PayPal’s credit cards.
On the surface, the PayPal Credit 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.
PayPal Credit vs. Traditional Credit Cards
The biggest difference between PayPal Credit and a bank-issued credit card is how it affects your credit score.
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 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 your 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 $27 the first time you’re late, and up to $37 each time thereafter. Debt can build up quickly, 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 periods on certain purchases when you’re checking out of an online store.
At the moment, PayPal is offering zero interest on all purchases over $99, as long as you pay the purchase balance in full within six months.
The variable purchase APR for new customers is 25.74 percent, which is slightly higher than most high street cards. Your credit limit will be at least $250, and you may even get a $10 sign-up bonus. There’s not been an official word from PayPal, but anecdotal evidence suggests the maximum credit limit is capped at $10,000.
Where Can You Use PayPal Credit?
Who let my broke ass into PayPal credit now I’m negative broke
— Don Conejo (@jaykozyy) January 24, 2019
If you’re wondering what stores accept PayPal Credit, the good news is that you can use the service at almost any business that accepts standard PayPal payments, including eBay (though you cannot use it for purchases that fall into the categories of adult, weapons, alcohol, or vehicles). Other participating stores include Walmart, Home Depot, Best Buy, and Overstock.
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.
And don’t worry—if you do not 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 four digits of your Social Security number, and then to accept the Terms of Service. PayPal will make a decision on your application 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 most major credit cards offer.
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.
If you use an Android device with the service, make sure to check out our article on how Android malware could empty your PayPal account.
Is PayPal Credit Right for You?
Now it’s over to you. Have you used PayPal Credit? Would you use PayPal Credit? And what do you think are the pros and the cons of PayPal Credit? You can let your fellow readers know your thoughts in the comments at the end.
If you’re trying to decide whether a PayPal Credit account is right for you, remember that it’s not free money. As with any credit line, you need to be financially responsible and ensure it’s the best fit for your needs.
Of course, PayPal isn’t the only online payment method you can use. If you want to learn more, read our article about the best PayPal alternatives.