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PayPal Credit: A Guide To PayPal’s Virtual Credit Line

If you’re a frequent PayPal user, you’ve probably heard about PayPal’s virtual credit line. Although you won’t be able to add another credit card to your wallet, PayPal’s virtual credit line allows you to stretch your online payments out over the course of several months if the cost is above a certain amount.

For example, online transactions that cost more than $99 can be stretched out over six months if you use the PayPal credit line, which is excellent. But if you go over your credit limit, PayPal might decline your purchase and charge you a high APR rate. The company also doesn't report your credit history to the major credit bureaus, so your credit score won't go up. Is the PayPal credit line right for you? Read on to find out.

What is PayPal Credit?

PayPal Credit is a virtual line of credit that is more of an installment loan so that you won’t be adding another plastic credit card to your wallet. It is accepted by anyone who takes PayPal as a payment method and can be used along with your existing PayPal account. The credit line is designed to be used throughout your merchant network as sort of a “bill me later” service.

It’s important to note that there the PayPal credit line functions differently than PayPal’s traditional accounts. If you’re not used to managing a credit line, you’ll want to do some homework. According to Robert DeYoung, finance professor at the University of Kansas School of Business, some people who aren’t familiar with how credit works may look at this as an account that is funded like a debit card.

But the problem is that there is a 20 percent increase in the form of interest to everything they buy if it’s not paid in full by the end of the month or whenever the promotional offer period ends. DeYoung notes that potential users should know the difference between a credit and debit card.

Credit Line at PayPal

All of your transactions are done online through your PayPal wallet. There are no application or annual fees, and missed payments don’t show up on your credit report. The interest rate is higher than average for other credit card companies. Additionally, PayPal doesn’t report your credit activity to the credit bureaus, so it won’t help you build credit. But on the other hand, your credit won’t be affected if you miss a payment.

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Some facts about the PayPal credit line

Comenity Capital Bank is the lender for PayPal credit. Comenity Capital Bank also issues some store cards from various retailers, including Lane Bryant, Abercrombie & Fitch, and Pottery Barn. These cards are also separate.

Customers will not get a credit card in the mail. PayPal Credit is a virtual line of credit, meaning that you will use your PayPal wallet to make transactions. However, PayPal offers a Mastercard through Synchrony Bank as well as a PayPal Prepaid Mastercard. You’ll need to apply for those separately.

PayPal credit is unsecured. The line of credit offered by PayPal credit is unsecured, which means that they are not secured by collateral that a lender can take hold of if you don’t pay. In other words, your credit is based on the promise that you will repay your loans. The Credit CARD Act covers PayPal.

Your payment can be made electronically, through the PayPal app, or online. You can also send a check via snail mail if you’d like.

Standard purchases and cash advances have an annual percentage rate of 19.99 percent. The standard average for credit cards is around 16 percent, so the PayPal credit line is a bit high. However, even if your credit is good, your rate will not go down. You will simply be extended a greater loan.

You can access your bill anytime. Customers can view their statements anytime they want by signing into their account. You can also opt to have emails or notifications sent to you every month when your bill is due if you want. Your statement will include your total balance, the minimum amount due, and how much money you need to pay to avoid interest fees.

There are no penalty rates; however, you will be charged up to $25 the first time you are late on a payment. Any late payments after that are suspect to up to a $35 charge.

PayPal currently has a special offer that includes receiving six months of no interest or payments, which is a longer time than other credit lines. But you will want to make sure you can pay off the entire balance by the time the six months is over.

PayPal Credit set the trend of letting people spread the cost of online purchases, describing themselves as “like a credit card, but without the plastic.”

PayPal Credit PROS

Convenient. Most users are instantly approved for credit and can start using it as soon as they become qualified.
No hidden fees. There are no annual or application fees. Plus, if you miss a payment, it doesn’t show up on your credit score.
You can get 0% interest for four months. PayPal credit offers 0% interest for four months on transactions of $200 or more. This will be automatically be applied to purchases that you make using PayPal credit except those that have a promotional offer. You can also use this offer over and over again depending on your credit limit. If you have a remaining balance after the four months is up, you’ll be charged a 17.9% variable, and your offer may be removed.
Installment offers. Select merchants offer installments that allow you to spread out the cost of your purchase over several payments. Although it’s subject to change, the installment payments let you pay different amounts of your purchase at various interest rates as long as your credit limit allows it.
You can cancel at any time. Your account can be closed at any time, but you’ll need to pay any remaining balances.
Buyer protection plan. As a PayPal credit user, you’ll be covered by the buyer protection plan. It states that if you buy an item that doesn’t match what the seller lists, PayPal will reimburse you. According to the website, all PayPal purchases that are paid with credit are covered. Additionally, PayPal credit can also be used in Pounds Sterling (GBP).
Pay after delivery option. PayPal allows you the option to pay after delivery for select customers. This means that you won’t have to pay for the item until it arrives. If you qualify, PayPal will pay the seller right away so that your item will ship. Then, they wait 14 days before collecting the money from your account to give you time to look things over before paying. If you’re not satisfied with the item, you have 180 days from the transaction date to report it.
Protection against unauthorized charges. PayPal protects you from unauthorized charges via their buyer protection plan. If you notice that there is a change on your account that you didn’t make, be sure to report it immediately so PayPal can take care of it by logging into your account and clicking on “dispute a transaction.”

PayPal Credit CONS

High interest rate. PayPal’s interest rate is higher than other credit cards, and it doesn’t report credit history to the credit bureaus. Therefore, it won’t help you build credit.
You’ll probably spend more. Experts estimate that users usually pay about 30 percent more after they become qualified for PayPal credit as it often becomes easier to borrow money.
It doesn’t apply to business accounts. To use PayPal credit, you’ll need to have a personal account. If you have a business account, you can contact PayPal, and they will switch your account over. Or you can create a new personal account to obtain the credit line.
You can’t send money to friends or family. If you want to send money to loved ones, you’ll have to use your traditional PayPal account. You also can’t use your credit line to deposit funds into your bank account.
No reward system. Unlike other credit cards, PayPal credit does not participate in a rewards program. For example, some credit cards have a rewards rate when you use your credit to buy gas or food. In some cases, you might get a small amount back such as $10, but many other lines of credit offer better options.
Subpar customer service. It’s hard to get a hold of a customer service representative when you call their toll free number. Extra long wait times are one of the most common complaints. You can handle most of your needs online, but talking to a representative on the phone might not be easy.

How To Apply PayPal Credit?

To use PayPal credit, you’ll first need to have a PayPal account
If you don’t have one, you can sign up for free using only your email address.
Then, apply for credit by going online to www.paypal.com and clicking on the button to apply
The website will ask you for your date of birth and social security number.
After you enter this information, PayPal will run your credit score, and you should get an instant answer as to how much you’re eligible for
If the website approves you, you may earn a credit line of at least $250. If you’re denied credit, you can still use PayPal to purchase items with your personal debit or credit card. You can also re-apply for credit 35 days after your last application. But be aware that apply checks your credit through a hard inquiry, which may cost you a few points on your credit score.

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Tips For Making A Payment with a PayPal Credit

You can make payments by using your PayPal account, a bank account or a debit card. To do so, you’ll need to log into your PayPal account and click on “make a payment.” Payments can also be made via phone by calling customer service at 800-368-7155. Your first payment will be due 35 days after you open the account and PayPal will notify you of your monthly invoices to prevent you from missing a payment.

You can expect your payment to be reflected on your credit account the same day that you make it. However, it may take a few days to show on your bank statement. If for some reason you cannot make a payment on time, you can call customer service, and they will do their best to help you.

PayPal suggests logging into your account frequently and viewing your history to help budget for your payments. Once you are logged into your account, you will be able to see your statement history, transactions, the payments you made, your credit limit and available credit, the minimum payment and due date, and your current and least statements.

PayPal Credit overview

PayPal credit might be a good option if you have a low credit score because you’ll be subject to a high interest rate just about anywhere you apply for credit. If you have good credit, it's worth your time to seek a credit line elsewhere as your interest rate won’t ever go down when you use PayPal credit. Additionally, PayPal doesn’t report to the major credit bureaus, so your prompt payment history won’t be noted. They also don’t offer much of a rewards system. On the other hand, missed payments won’t affect your credit score either. To use PayPal credit successfully, you’ll need to know the difference between a debit card and a credit card. You’ll also need to make your payments on time as late payments are subject to a fee and a 19.99% APR. PayPal sends you monthly notifications to make sure you don’t miss a payment, but logging into your account regularly can help keep you on track. The benefits of PayPal’s credit line are not much different than using the traditional account itself. So if you’re on the fence, stick with your regular account before applying for credit and remember that your credit score will be affected each time you apply.

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