We break down what PayPal Credit is (and isn't), how PayPal Credit works, pros, cons, costs, and more. Find out if PayPal Credit would work for you.
Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
WRITTEN & RESEARCHED BY Chris Motola Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York. Expert Contributor
Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina.
REVIEWED BY Erica Seppala Erica began writing on small business topics in 2008. She joined Merchant Maverick in 2018 and focuses on loans, accounting, and POS. She is a Certified ProAdvisor for QuickBooks Online and QuickBooks Payroll. She has been cited in MSN, Reader's Digest, Vox, U.S. News & World Report, and Real Simple. She is a graduate of Limestone University and resides in Greenville, South Carolina. Editor & Senior Staff Writer
Our content reflects the editorial opinions of our experts. While our site makes money through referral partnerships, we only partner with companies that meet our standards for quality, as outlined in our independent rating and scoring system.
PayPal has expanded its payment options over the years to include customer financing. PayPal Credit, a line of credit that can be used to be used at checkout to pay for goods and services, provides an alternative to paying by card or wallet.
How does PayPal Credit work, and is it a good deal for customers and businesses? For those with a PayPal business account, PayPal Credit is another way that you can accept payments from your customers. (We have a post that can walk you through how to set up a PayPal business account if you haven’t done so before.)
Below, we’ll discuss how PayPal Credit works, the pros and cons, how much it costs, and who can benefit from the service.
Table of Contents
PayPal Credit is a line of credit issued by Synchrony Bank. Approved PayPal users can use this virtual line of credit, which functions similarly to a credit card, letting you pay for online purchases in installments rather than upfront.
Note that PayPal Credit is not the same as a PayPal debit or credit card. Despite filling a very similar niche, PayPal Credit is also not the same thing as PayPal’s Pay in 4 feature. You can think of PayPal Credit as closer to a credit card, while Pay in 4 is more akin to POS financing.
With PayPal Credit, you’ll have gone through the vetting process in advance and can utilize your revolving line of credit at will. You also have more flexibility in how and when you pay off your balance. In the case of Pay in 4, the financing decision is approved (or denied) at checkout, after which you’ll have a very structured repayment plan.
Approved PayPal users can use PayPal Credit as a payment option whenever they check out using PayPal, either from a website or at a brick-and-mortar store that accepts PayPal.
A line of credit works under a similar principle to a credit card. You’ll be extended a credit limit that you can borrow against. As you pay your balance off, your credit becomes available again.
PayPal Credit occupies an interesting niche in the consumer financing world, combining the advantages of a line of credit with some of the conveniences of a credit card:
*Note that this pro/con list is from a PayPal Credit user’s point of view. From a merchant’s point of view, there are no major downsides to PayPal Credit other than the downsides of using PayPal in general (namely, high PayPal transaction fees). However, a potential upside of advertising promotional financing with PayPal Credit as a merchant that already offers PayPal as a checkout option is that PayPal users typically spend more with PayPal Credit.
PayPal Credit is easy to apply for and start using. But it’s important that you understand a little bit about how PayPal Credit works before you start using this service.
Any PayPal user can apply for PayPal Credit. If you don’t have a PayPal account already, you will be prompted to create one when applying for PayPal Credit. The application is quick and simple: you only have to supply your date of birth, your income after taxes, and the last four digits of your Social Security number.
Be warned that PayPal will do a hard vs. a soft credit pull, which might ding your credit score a few points. Typically you’ll have your approval answer within seconds.
PayPal doesn’t have any clearly stated applicant criteria, but since Synchrony Bank will be doing a hard pull on your credit, it’s safe to assume applicants with poor credit or limited credit history may be declined.
Once you have been approved and accepted the terms of use, PayPal will give you a credit limit of at least $250. PayPal will periodically review your account and may increase or decrease your credit limit.
Note that PayPal Credit is the new name for Bill Me Later, which has been around for more than ten years. If you already had a Bill Me Later account, you now have a PayPal Credit account.
Once you have your PayPal Credit account set up, you can use PayPal Credit in conjunction with your PayPal account anywhere PayPal is accepted. You simply need to set up PayPal Credit as your default “preferred” payment option for PayPal or select PayPal Credit as your payment option when checking out.
Some merchants may also prompt you to pay using PayPal Credit instead of your regular PayPal preferred payment option (which is usually linked to a credit or debit card or your bank account).
You can manage your PayPal Credit settings using a web browser or with the PayPal app. You can also make payments on your balance and see your current credit limit — just like you would for any credit card app you might already use.
As part of its “Cash Advance” feature, it’s possible to use PayPal Credit to send money to someone online using the Send Money tab, the same way you can with any other PayPal Wallet option. You cannot use this feature to send a cash advance to yourself.
PayPal Credit requires monthly payments on your balance. You can make the minimum payment at the end of the month, make payments in any other amount whenever you like, or pay your balance in full at any time, similar to a credit card.
For new accounts, PayPal Credit has a variable APR of 31.39% on standard purchases and cash advances (at the time of update). Being variable, the APR will fluctuate with the Prime interest rate. The minimum interest charge is $2.
As is the case with credit cards, PayPal Credit extends users an interest-free grace period in which to pay off their entire balance. You will not be charged interest if you:
PayPal Credit is currently promoting a six-month special financing offer in which you won’t have to pay any interest on purchases of $99 (in a single transaction) or higher for six months. You will be charged interest if you don’t pay the balance in full within six months. Note that this is not an introductory offer but rather an ongoing promotion, so it may be around for years or could end next week.
To send money (Cash Advance) with PayPal Credit, PayPal will charge a flat fee. This is the same fee you’d pay when you use a debit or credit card to send money through PayPal.
For late payment fees, PayPal charges up to $41.
Short Answer:
Yes, your customers can pay using PayPal Credit as long as your business accepts PayPal payments. But when it comes to using PayPal Credit for business purchases, better options are available.
Long Answer:
Businesses that accept PayPal at checkout can offer customers the option to pay with PayPal Credit, either online or in-store. If you accept PayPal as a payment form, PayPal Credit is already available to customers who check out with PayPal at no additional cost to your business.
When a customer makes a purchase using PayPal Credit, PayPal deposits the full amount of the purchase into your account just as with any other PayPal transaction, so there is no added risk to you as a PayPal merchant; accepting a PayPal Credit payment is the same as accepting any other PayPal payment.
However, if you make PayPal sales online, you can promote PayPal Credit financing options on your website, which might be of added benefit to businesses that sell large-ticket items online.
There are multiple ways you can allow customers to pay with PayPal Credit:
Of course, only customers who have been approved by PayPal Credit may pay with PayPal Credit, and then only up to the amount of their credit limit. Customers who have set up PayPal Credit as their preferred PayPal payment option will automatically pay for all their PayPal purchases using Credit.
Customers can also choose PayPal Credit in their PayPal Wallet for individual transactions when presented with this option at checkout.
Businesses might also potentially use PayPal Credit to make business purchases from merchants or vendors that accept PayPal.
However, because it is geared toward consumers, credit limits on this line of credit are on the low side, and APRs are on the high side. Unless you have a very small enterprise, you are better off getting a traditional line of credit or business credit card to make business purchases.
As an alternative to making business purchases with PayPal Credit, PayPal also offers small business loans ranging from $5,000 to $100,000 (or $150K for repeat borrowers) with LoanBuilder: A PayPal Service.
PayPal Credit is a service offered under the PayPal brand in partnership with Synchrony Bank. To use PayPal Credit, you’ll have to have a PayPal account.
Think of it as an add-on feature to PayPal, i.e., you can use PayPal without using PayPal Credit, but you can’t use PayPal Credit without using PayPal.
PayPal Credit functions very similarly to a credit card in nearly all respects but isn’t a literal card that you can carry around in your physical wallet. PayPal Credit is a revolving line of credit that you can use for any transaction on which you could use your PayPal account.
Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. He currently resides in the Hudson Valley region of New York.
View Chris Motola's professional experience on LinkedIn.
