How Does PayPal Credit Work?

paypal credit

How Does PayPal Credit Work?

In the words of the payments provider themselves, PayPal credit is “like a credit card, without the plastic”.

Essentially, the scheme provides you with a credit limit, linked to your PayPal account, which you can use for online purchases and pay off within a set period without incurring any interest.

It works just like a credit card, so if you pay your balance within the set 56-day period, you don’t get charged interest.

If you make purchases over £99, this interest-free period increase to four months, as long as you make the minimum monthly repayments.

Who Can Apply?

To apply for PayPal Credit, you must meet the following criteria:

  • 18 or over
  • UK resident
  • Employed with an annual income of over £10,000
  • No County Court Judgements or bankruptcy
  • A ‘good’ credit history

What Are the Pros?

Setting up PayPal Credit is quick and easy. You can receive your credit limit on the same day, which makes it a potentially faster option than a credit card, which could take several days for approval and card delivery.

If you spend more than £99 in a single online transaction, PayPal Credit gives you four months to pay it off. This can mean a significant saving compared to paying interest on a credit card. Just make sure you meet the minimum repayments (1% or £5 per month, whichever is greater) and pay off your full balance before the end date.

You can use PayPal Credit with any online retailer that accepts PayPal (which is pretty much all retailers). While many retailers offer interest-free finance on large-value transactions, each one involves an application and credit check. If you use PayPal Credit you only need to go through this process once, and you can keep track of all your finance in one place.

The four-month 0% offer applies every time you make a purchase over £99, whereas with an interest-free credit card the 0% offer on new purchases is time limited.

As with a credit card, PayPal Credit covers you under Section 75 of the Consumer Credit Act, which gives you protection if you don’t get what you paid for (breach of contract) or misrepresentation (you make a purchase based on wrong information).

What Are the Cons?

The application process involves a full credit check, which will impact your credit rating even if you get approved. This may put some people off, especially if you are intending to apply for a credit card or mortgage soon. There is no option within PayPal Credit to find out if you’re likely to be approved before you apply.

You can’t yet use PayPal Credit in physical stores, only for online purchases. This puts it at a disadvantage against a credit card, which gives you the freedom to shop anywhere online or in-store.

There are some retailers that don’t accept PayPal, and you can’t use it to pay for hotels or rental cars.

PayPal scams are rife, with phishers targeting users with emails requesting login details. The high credit limit associated with PayPal Credit (between £250 and £8000) means if you fall foul of a scam the fraudsters could potentially rack up huge costs. It goes without saying that if you use PayPal or PayPal Credit, it’s important to be super vigilant – a genuine email from PayPal will never ask you for sensitive information like your password, bank account, or credit card details.

paypal credit