April 15, 2020

How Does PayPal Credit Work

Read more about Merchant Services

PayPal credit makes it easy to shop online. But will it affect your credit score? Find out if it's even good before signing up.

What Is PayPal Credit?

PayPal Credit is a revolving line of credit linked to your existing PayPal account. It's a replacement for PayPal's Bill Me Later feature, and works similarly to a regular credit card.

However, you don't get a physical card. That means you're limited to purchasing at participating merchants that accept PayPal.

The line of credit is offered by Synchrony Bank. They will review your credit report and other information in deciding whether to approve or deny your application.

You do need an existing PayPal account in order to sign up for PayPal Credit. Signing up for PayPal is free.

How Does PayPal Credit Work?

PayPal Credit introduces an interest-free way to make payment installments on purchases of at least $99. Starting out, you'll get a line of credit of at least $250. If you feel you need more, you can always request an increase.

But if you fail to pay the full amount back within 6 months, they'll charge you interest dating all the way back to your purchase date. You're subjected to an APR and a minimum interest charge. You won't pay an annual fee for having a PayPal Credit account.

Your credit line can also fluctuate based on your creditworthiness. If you try to make a purchase that exceeds your current line of credit, PayPal will evaluate your creditworthiness in real-time. At their discretion, they may grant you the ability to make the purchase and temporarily increase your line of credit. However, they may lower your line of credit once you have paid down the balance.

How do you pay with PayPal Credit?
PayPal Credit can be used anywhere that offers PayPal as a payment option. During checkout, you'll select PayPal as your payment method. Then, you can choose to use PayPal Credit.

PayPal Credit Pros & Cons


  • No annual fee
  • 6 months interest free for purchases of $99 or more
  • Can be used to send money for a fee of 2.9% + $.30
  • Not liable for unauthorized charges on your account
  • Safer than using a credit card (PayPal Credit obscures personal information during payment processing)


  • Creates a hard inquiry on your credit report, which may lower your credit score
  • Late payment fees if you miss payments
  • High APR, similar to any other credit card
  • No rewards or points to earn on purchases
  • Exclusive to online purchases where PayPal is accepted
  • Can entice you to spend more than you should

How Is PayPal Credit Different Than a Credit Card

PayPal Credit isn't the same as having a credit card. The biggest difference is that you won't receive a physical, plastic card. That means where you can use PayPal Credit is limited. In fact, usually only online retailers accept PayPal as a payment method.

Your credit line is also a little different from a credit card's credit limit. With a traditional credit card, transactions are declined if they will push you over your credit limit. The credit line with PayPal Credit is more fluid. PayPal Credit evaluates your creditworthiness on the spot and may extend extra credit when you're making purchases that will push you over your line of credit.

How to Apply for PayPal Credit

You can apply for PayPal Credit directly on their website. Before you begin, you'll have to have a PayPal account.

Here's what you'll need to provide:

  • Date of birth
  • After-tax income
  • Last 4 digits of your Social Security number (SSN)
  • Agree to the terms and conditions

After you submit the information above, you'll find out if you're approved almost immediately. When you are approved for a PayPal Credit account, it will be linked to your existing PayPal account.

Your line of credit will be at least $250. But if you need more, you can request it at any time by calling PayPal's customer service line.

Does PayPal Credit affect your credit score?
Yes, PayPal Credit does affect your credit score. When you apply, it creates a hard inquiry on your credit report, which could potentially lower your score. Plus, if you miss payments or violate other terms of the agreement, PayPal may report that to the credit bureaus.


You'll need to fulfill these general requirements to get PayPal Credit:

  • Have a PayPal account
  • Be at least 18 years of age
  • Provide your personal information
  • Agree to a credit check from Synchrony Bank

PayPal & Phishing Scams
Because PayPal stores personal and financial information, you need to watch out for phishing scams. Be very cautious when opening emails and clicking on links you receive from other sources.

If you receive an email stating that you need to log into your account, don't use the link. Instead, go directly to PayPal's website on your own and check your account.

PayPal Credit for Businesses

PayPal Credit can be a great opportunity for business as well. It gives your customers the opportunity to finance their purchases without any risk to you and your business. Keep reading to learn how it works.

PayPal Credit Customer Support
Phone: 1-844-373-4961. (Monday - Friday from 8am to 11pm EST; Saturday and Sunday from 9am to 9pm EST).

PayPal Credit also has a messaging option for customer service that you can access through your account online.

Accepting PayPal Credit as a Business
PayPal Credit lets you give your customers the option to finance their purchases without any risk or cost on your part. When you promote PayPal Credit on your website, your customers can sign up to finance their purchases of $99 or more for 6 months. You'll get paid instantly and won't have to worry about billing your customers or tracking down your money.

Best of all, having PayPal Credit available on your website can boost your sales. According to PayPal, 42% of PayPal Credit users purchase more than nonusers. Plus, businesses that promote PayPal Credit see 214% larger transactions.

Can I use PayPal Credit in stores?
Currently, PayPal Credit is only available for online purchases. But plenty of online retailers allow PayPal as a payment method, so you'll have a lot of opportunities to use PayPal Credit.

Using PayPal Credit for Business Purchases
You'll need to use a Social Security number to sign up for PayPal Credit, so it's more geared toward individuals rather than businesses. Plus, since PayPal's credit limit can be relatively low, it's not ideal for businesses looking to expense large purchases.

However, PayPal does offer two other options if you're looking for business financing. Both can be approved within about one business day and charge a fixed fee. Your options are:

  • PayPal Working Capital: Offers loans from $1,000-$300,000 that you repay automatically with a percentage of each PayPal sale you make. A minimum payment is required and you must have processed at least $15,000 worth of PayPal transactions in the past 12 months.

  • PayPal Business Loan: Offers loans from $5,000-$500,000, which you'll pay back with fixed weekly payments. This is a more traditional loan that looks at the full picture of your business.

Who is PayPal Credit best for?
PayPal Credit is great for people who are making larger purchases and would like to pay them off slowly over 6 months without incurring interest. As always, it's best to make sure you can afford the payments before you take on new debt.

How It Compares

PayPal Credit vs Affirm
Affirm offers a service similar to PayPal Credit, but they charge interest on your purchases. It's only available to use digitally, so you won't receive a physical credit card. But it's accepted at plenty of merchants online, including Purple Mattress and Adidas.

When you check out using Affirm, you'll be able to choose a payment schedule that works best for you. You can see the installment amounts and the interest rates before you complete the purchase.

PayPal Credit vs AfterPay
AfterPay also offers an interest-free way to pay for purchases of $35 or more. You'll be able to spread payments over 4 installments, two weeks apart.

The first installment is due at the time of purchase, like a down payment. AfterPay charges no interest or fees when you pay on time. Plus, they'll send you notifications to help you stay on track of payments.

PayPal Credit vs Mastercard
Mastercard has plenty of options for credit cards, whether you're searching for travel rewards, cash back, or a secured card that helps you build your credit. It's accepted nearly everywhere and isn't limited to online merchants. Instead, you'll receive an actual plastic card that you can take to physical locations.

The perks of getting a Mastercard are the rewards and bonuses that you may qualify for when you use the card.

Bottom Line

PayPal Credit replaced its Bill Me Later feature and offers a great way to finance purchases without the hassle of added fees and interest. As long as you can pay the full balance of your purchase within the 6-month grace period, it can be a great opportunity.

Write to Kim Shackleton at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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