What Is PayPal Credit?

PayPal Credit gives PayPal users extra time to pay off a purchase through a revolving line of credit.

Learn more about how PayPal Credit works, how to apply for PayPal Credit, if there are costs involved, and how to make the most of the service.

What Is PayPal Credit?

PayPal Credit gives PayPal users a way to extend the payment period for certain purchases through a line of credit based on their creditworthiness. Synchrony Bank (formerly GE Capital), known for partnering with retailers to offer credit cards, manages the program. 

If PayPal approves your application for the program, you can choose “PayPal Credit” as a payment option for websites that allow PayPal payments.

How PayPal Credit Works

Once you have a PayPal Credit account, you will be given the option to choose it as a payment method during the checkout process if the merchant offers it. As long as you have enough credit available, your purchase should go through. If you don’t have enough credit, PayPal may allow the transaction to go through by instantaneously increasing your credit limit.

How It Works for Purchases

If you shop at an online retailer that accepts PayPal, you should see PayPal Credit as an option. On purchases of $99 or more, you’ll have six months to complete the payments without interest. For purchases that are less than $99, you’ll have to pay the balance in full to avoid paying interest.

As with a credit card, each month you’ll have a minimum payment due, you can set up automatic payments or pay manually through your PayPal account.

How It Works for Sending Money

If you need to pay someone you know and don’t have the cash on hand, you can use PayPal Credit to send money. Choose the “Pay or send money” option in your PayPal.com account and enter the recipient’s info (their email address or phone number), then change your payment method to PayPal Credit. There is no promotional financing for these transactions, so you’ll have to pay the amount owed in full by the due date, or you’ll be hit with interest.

PayPal Credit Costs and Fees

PayPal Credit has a variable purchase APR of 23.99%, which is slightly higher than the average credit card interest rate. There is no annual fee. If you miss a payment, you will pay up to a $40 late payment fee if you’ve had a late payment in the past six billing cycles or $29 if you haven’t. There’s also a $29 fee for returned payments.

Promotional Offers

PayPal Credit has two types of promotional offers:

• 0% APR for six months on purchases of $99 or more
• Reduced interest rates for certain purchases

Though these offers can seem like a great deal, just be mindful that if you owe even $1 the day after the promotional period expires, you’ll pay deferred interest. In other words, you’ll be charged all of the interest you would’ve paid from the date of the purchase if you hadn’t got the promo rate.

How to Apply for PayPal Credit

If you have a PayPal account, you can log in and apply for PayPal Credit at any time or you may be offered the option to apply when checking out with regular PayPal via an online retailer. The process is quick: Enter your birth date, annual income, the last four digits of your Social Security number, and check the box to agree to the terms and conditions. PayPal will perform a hard inquiry when it checks your credit during the approval process. In a few seconds, you should have your decision.

If approved, PayPal Credit will be a payment option for all future online checkouts where PayPal is accepted.

Pros and Cons of PayPal Credit

Pros Explained

• Promotional periods give you extra time to pay off large purchases without interest: Spreading out payments over time can be a huge help as long as you pay off the balance by the end of the promotional period.
• Purchase protection and free returns: Purchases made with PayPal Credit enjoy PayPal benefits. This includes a full refund if a purchase doesn’t meet your expectations and free shipping for items you send back (exclusions may apply).
• Easy application process: You’ll get a decision in just a few seconds. If approved, you can use PayPal Credit immediately.

Cons Explained

• Costly if you don’t pay off your promotional purchase in time: Deferred interest and PayPal Credit’s high standard APR can significantly increase the cost of your purchase.
• You can’t use it in brick-and-mortar stores: PayPal Credit is limited to online transactions only. 
• No opportunity to earn rewards: If you use a rewards credit card instead, like the PayPal CashBack Mastercard, you can earn cash back or points on your purchases.
• Not ideal for sending money to others: Because of the variable fee of 2.9% and the flat fee of $0.30 that's added to the amount you send to friends using PayPal Credit, you should use this option sparingly. 

Who Is PayPal Credit Best For?

PayPal Credit is best for online shoppers who enjoy using PayPal and who, on occasion, would benefit from some extra time to pay off purchases above $99. For smaller purchases or to send money to others, it’s not a great deal, since there are added costs involved. If you only need a couple of months to pay for a purchase, consider using PayPal Pay in 4, a buy-now-pay-later service that doesn't charge interest.

Those with good-to-excellent credit may be better served by opening a credit card that offers 0% APR for at least 12 months. In addition to having a longer period to pay off a large purchase, you’ll avoid deferred interest and possibly earn rewards on your purchase.

PayPal Credit could be good to have in a pinch, but relying on it too much could cost you more if you get hit with APR charges, deferred interest, or fees for peer-to-peer payments.