What is PayPal Credit and how does it work? PayPal is a well-known online payment system that allows you to send and receive money worldwide.
Now, imagine if PayPal also offers you the option to borrow some money when you need it— Yes, that’s PayPal Credit!
In this guide, we’ll explain how PayPal Credit works, how you can use it, and what you should know to make the most out of it. So let’s dive in!
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What is PayPal Credit?
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PayPal Credit is an evolving credit card account linked with your PayPal profile that provides a reusable credit limit for flexible payment solutions.
It provides financial flexibility by allowing you to pay for purchases later. It is accepted online and generally everywhere. You can use it simply by selecting PayPal Credit after checkout.
So, you get the ease of using your account with the added benefit of having a credit option right there in your account.
How does it work?
The good thing about this feature is that you can use it for making purchases and even sending money. Interesting right?
However, the PayPal credit works differentlysix months for making purchases and for sending money. Let’s see how it works for the two.
How PayPal Credit works for purchases
When shopping online at stores that accept PayPal, PayPal Credit is an available option. For purchases more than $99, you enjoy a six-month period to complete payments without any additional interest.
However, for purchases under $99, you must pay your full interest to avoid interest charges. Similar to a regular credit card, you must make monthly minimum payments.
Additionally, you can choose between setting up automatic payments or manually paying for purchases through your PayPal account. This flexibility lets you manage your payments efficiently, providing a convenient way to make purchases.
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How it works for sending money
When you need to pay someone but don’t have the cash, you can use PayPal Credit.
Just go to your PayPal.com account, choose “Pay or send money” and enter the recipient’s information (phone number or email). Then, switch to PayPal Credit as your payment option.
It is vital to note that no promotional financing is available for these transactions. To prevent interest charges, the outstanding amount must be paid in full by the due date. This service enables users to settle payments to others conveniently using PayPal Credit.
Does it have any cost or fee?
Yes, it does. PayPal Credit has a variable purchase APR of 23.99%, which is slightly higher than the typical credit card interest rate.
However, the credit account does not have an annual charge. Late payments may result in fines, with a maximum of $40 for individuals who have had a late payment in the previous six billing cycles, or $29 for those who have not.
In addition, there is a $29 fee for returned payments. Understanding these fees is vital to manage your PayPal Credit responsibly and avoid incurring unnecessary fees.
Note that PayPal Credit also has two promotional offers. They are:
1. 0% APR for 6 months on purchases of $99 or more
2. Reduced interest rates for certain purchases
However, keep in mind that if you owe even $1 the day after the promotional period ends, you’ll have to pay delayed interest. In other words, you’ll be charged the interest you would have paid if you hadn’t gotten the promotional rate from the start.
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How to apply
If you have a PayPal account, you can apply for its credit at any time. You may even be given the option to apply when you check out with standard PayPal through an online store. The procedure is simple:
- Enter your birth date, annual income, and the last four digits of your Social Security number.
- Check the box to agree to the terms. When PayPal checks your credit throughout the approval process, it will do a hard inquiry.
- If granted, will be a payment option for all future online purchases where PayPal is accepted.
Pros and cons of PayPal Credit
1. Promotional periods allow you to pay off major purchases without incurring interest
2. Spreading out payments over time can be extremely beneficial, as long as you pay off the balance before the end of the promotional period.
3. PayPal Credit purchases are eligible for rewards. This includes a complete refund if a purchase falls short of your expectations and free delivery for returned items (exclusions may apply).
4. Simple application procedure and decision-making. If authorized, you can utilize PayPal Credit right away.
It has the following cons:
1. Deferred interest and the high standard APR of PayPal Credit can dramatically increase the cost of your transaction.
2. It is only available for online purchases.
3. You can only receive cash back or points on your purchases if you use a rewards credit card, such as the PayPal CashBack Mastercard.
4. It is not ideal for sending money to friends because of the variable fee of 2.9% and the flat fee of $0.30 that’s added to the amount sent when using it.
