Is a PayPal credit account right for you?

A Paypal credit account is very different from a Paypal credit card. This is a line of credit that will allow you to purchase items using your Paypal account, even if your Paypal balance is insufficient to cover the purchase.

So why do you want to register a Paypal credit account? There are several features of this line of credit offered by Paypal, which has many advantages. Most importantly, it allows you to spread payments over a period of time without incurring any penalties or interest.

Let’s explore what a Paypal credit account offers, and when and why you might want to use it.

What is a PayPal Credit Account?

Think of a Paypal credit account as a line of credit that attaches to your regular Paypal account.

When you apply for a PayPal loan, your loan application is processed by Synchrony Bank. Since the lowest line of credit offered is only $250, many people will be able to get a line of credit.

You’ll need to provide your date of birth, net income after taxes, and your Social Security number. PayPal credit account approval is instant in most cases.

Before you decide to apply for a PayPal credit account, there are a few important things you should know.

  • Your credit report will take a “hard” hit once during initial credit approval. This can affect your credit report.
  • Your initial credit limit will be $250.
  • Paying your bill on time will increase your credit line over time.
  • The variable annual percentage rate (APR) is 25.99%.
  • Sending money to someone (using a cash advance) will cost a fee of 2.9% plus $0.30.
  • Late payments on your PayPal credit account will not affect your credit score.
  • Paying off your PayPal credit account on time will not improve your credit score.

Once approved, the line of credit will be linked to your PayPal account. Whenever you buy something anywhere that accepts PayPal, you’ll see your new PayPal credit account as a payment option.

How to use your Paypal credit account

Whenever you buy from a seller that accepts Paypal payments, like eBay, you’ll see PayPal Credit as a payment option.

Choosing the PayPal credit option processes the payment just as if you were paying with your regular PayPal account. If you want to use your PayPal credit for all of your purchases, you’ll need to set it up as your preferred payment method in your PayPal account.

There are a few things to keep in mind to reduce the amount of fees and interest you end up paying on your purchases.

  • Anything you buy over $99, you pay no interest if you pay it off within 6 months.
  • Pay at least the minimum monthly payments to avoid interest charges.

When to use PayPal credit

There are several reasons why this is better than getting a PayPal credit card (or any other credit card).

PayPal Credit works as a security buffer for your PayPal account. Unfortunately, whether you transfer money from your bank account to PayPal or someone pays you via PayPal, it takes a few days for the money to arrive.

Purchase of items pending payment

Your account may be close to zero, but since you have money coming in, there’s no reason you can’t use your account to buy something with your PayPal account.

With PayPal credit, even if your account is close to zero, you can still buy things without worrying. After receiving the payment to your account, you will be able to repay the used credit.

Use PayPal Credit as an alternative credit card

The psychology of having a credit card with a high limit often leads people to overspend. Before they know it, they’ve used up $5,000 or $6,000 of their $10,000 credit card limit.

This is not an amount most people can afford to pay off in a month, so they are forced to transfer most of the balance from month to month and pay significant interest.

Paypal credit allows you to use credit for small purchases, but not so much that you can’t afford to pay it off each month. Paying off the entire balance means you’ll avoid paying the 25.99% interest rate that comes with smaller purchases up to $99.

That doesn’t mean you can’t top up your balance and avoid interest charges, but only if you make purchases over $99. You will also need to ensure that you pay these costs before the 6 month limit expires.

Payment for essential goods

Let’s face it, sometimes the necessities of life sometimes exceed your monthly income. This doesn’t happen every month, but during times like the holidays it can happen.

Using PayPal to buy groceries or gas is possible, given that there are currently more than 30 grocery chains in the country that accept PayPal payments.

Even online grocery stores like GrumMarket accept PayPal.

As long as you use your PayPal credit account sparingly for things like this and make sure to pay off the balance next month, it’s an acceptable way to get through these tough times.

Use the convenience of the mobile application

When you use the PayPal mobile app for iOS or Android, you can keep a close eye on how much PayPal credit you’re using.

Plus, you can make quick payments so you’re on time and never late with a loan payment. But even if you do, remember that missing a payment or two on PayPal credit won’t affect your credit score like missing a credit card payment.

Reasons Why You Shouldn’t Use a Paypal Credit Account

The convenience of a Paypal credit account is both a blessing and a curse. For all the reasons above, it gives you access to money when you need it.

However, it is not for everyone. If any of the following apply to you, you probably shouldn’t be applying for a PayPal credit account.

  • It is difficult for you to repay the debt on time.
  • You tend to compulsively buy things you don’t need.
  • You live paycheck to paycheck.
  • You already have several maxed-out credit cards.

If you already have bad credit habits, 25.99% interest on the balance you don’t pay can quickly get you into trouble.

Carrying a balance over the 6-month limit means your PayPal credit account can become the same as any of your maxed-out credit cards. You pay mostly interest on the balance, which can become very difficult to pay off.

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