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5 Min. Read

What Is PayPal Credit? Virtual Credit for Online Shopping

What Is PayPal Credit? Virtual Credit for Online Shopping

PayPal has a way of accessing credit to help you with your online shopping. Here’s what you need to know about PayPal Credit.

PayPal Credit is PayPal’s answer to a digital credit card. It’s not a physical credit card. It’s not an overdraft. It is like a digital hybrid in between the two systems.

It is easy to set up via your PayPal account and manage completely online. Today’s we’ll answer all of your questions about PayPal Credit and how it works. 

Here’s What We’ll Cover:

How Does PayPal Credit Work? 

What Are the Terms of PayPal Credit? 

How to Apply for PayPal Credit

How to Use PayPal Credit for Online Shopping

Is PayPal Credit Worth It? 

Key Takeaways

How Does PayPal Credit Work? 

The most important thing to note before we begin is that PayPal Credit is not the same as using your credit or debit card with PayPal. 

PayPal Credit is a completely new line of credit that is hosted by PayPal themselves. 

 Having a PayPal Credit account is mostly aimed at shoppers. It is intended for small online purchases with a “pay later” appeal. 

Note: this is a line of registered credit so it will affect your credit score if you don’t use it wisely.

What Are the Terms of PayPal Credit? 

I know we love to skim over the terms and conditions. With a credit agreement, you need to know what you’re getting yourself into. 

To briefly summarize, PayPal Credit works very similarly to a physical credit card. It is best described as financing on purchases.

You will have a statement balance that you will need to repay in monthly payments. 

You can pay the monthly balance with a minimum payment (which is never advisable). Or you can pay off the entire balance. As with traditional credit cards, you can set up a direct debit payment every month to never miss a single payment. 

Because your credit account is housed in PayPal, it is linked to an eligible bank account, your debit card and your PayPal balance. That means you can use any of those payment methods to settle your account.

Sounds good so far right? Now for the not-so-great part. 

What Are the Interest Rates?

PayPal offers a Variable Purchase APR of 23.99% which is not terrible. It does, however, change according to the Prime interest rate.

The minimum interest charge every month is $2.

The late payment fee is quite high at 19.99% APR. 

How to Apply for PayPal Credit

The application process is pretty simple.

They will ask you for your personal details, social security number and income.

PayPal will then do a hard credit pull on your credit file. It should only take a few minutes to approve you if you have a strong credit score.

If you are approved, they will set your credit limit in line. That said, don’t expect limits over a couple of thousand dollars. Those with average credit scores will probably start at $300-500. 

As I mentioned, this really is for small purchases and online shopping. Larger purchases are better suited for traditional credit cards.

How to Use PayPal Credit for Online Shopping

Great - you’re in! Now to start using it for your online purchases.

You can now use it with any online stores that use PayPal as a payment processor.

All you need to do is select “PayPal Credit” as your payment method when you checkout using the PayPal portal. 

If you want, you can even set it as your default payment method, instead of your debit card or bank account. 

Is PayPal Credit Worth It? 

That is a great question! The truth is it depends on what you are using it for and your credit usage. 

PayPal Credit is a good option for you if: 

  • You are a frequent online shopper and want the convenience
  • Your current lines of credit are a higher APR than 23.99%
  • You want to repair your credit score with a low balance line of credit
  • You want that extra purchase protection that PayPal provides
  • You want convenient credit without the bells and whistles

PayPal Credit is not ideal for you if: 

  • You want larger credit card limits and have excellent credit
  • You want perks that you would get from credit cards e.g cashback, Airmiles etc
  • You have access to lower credit card APRs
  • You are an overspender when it comes to online shopping
  • You don’t use PayPal to shop online
  • You want a business credit card

Key Takeaways

PayPal Credit is definitely worth considering if you want a small line of credit for your online shopping. It is fast, convenient and relatively low risk because of the small credit limit. But it is definitely not for everyone. We hope this article helps you decide whether it is worth it for you.