First named Confinity in 1998, PayPal was launched in 2001 before being bought by eBay in 2002. It is now one of the most popular electronic payment systems in the world with annual revenue exceeding 25 billion USD. PayPal offers many products, one of them being PayPal Credit.
With PayPal Credit, you can spread out the cost of your online purchases over a number of monthly instalments. PayPal Credit gives you a credit limit that is linked to your regular PayPal account.
It works almost like a credit card, but instead of using plastic, you simply make your purchase online by selecting PayPal Credit as your payment method.
Just like a credit card you'll get a monthly statement, and you'll have to make at least the minimum payment toward your balance each month. Payments may be done via a recurring direct debit or a withdrawal from your PayPal account.
Numerous online retailers in the U.K. accept PayPal Credit as payment, and you may manage your PayPal account on a computer, tablet, or mobile device.
With PayPal Credit, you may spread out the cost of your purchases over monthly instalments. Each qualifying purchase will result in a four-month interest-free repayment period.
As long as you have an adequate available credit limit, you can benefit from a 0% purchase interest rate for four months on your purchases. However, to be eligible for the 0% offer you have to make a purchase of at least £99 or more, either in a single transaction or as the sum of your checkout basket.
The 0% discount won't apply to any purchases under £99, and if you don't pay for them by the date on your statement, you'll be charged interest at a rate of 21.9% per year. Any balance that remains after the 0% period will be subjected to this rate.
In some cases, you may be given the option to spread out the purchase in instalments. This option is offered by some online stores and allows you to spread out purchases over 6 to 48 months. These agreements also come with promotional interest rates that are lower than current rates.
Depending on the merchant, your offer may be different and some may also be interest-free. But until the remaining balance is paid off, you must make the agreed repayments every month.
Be aware that PayPal Credit and PayPal Pay in 3 are not the same things.
Pay in 3 works very similar to other buy now pay later (BNPL) plans by allowing you to divide your purchase into three interest-free payments.
The first payment is made at checkout, and the remaining balance is paid in two instalments on the same day each month. It is only accessible to a select group of retailers and products, and purchases must total at least £30 but no more than £2,000.
The minimum repayments on your PayPal Credit are determined by your transactions and can consist of:
Any monthly instalments owed under an instalment plan
2% of the outstanding balance, or £5, whichever is higher
Interest, fees, or arrears of any kind
Here’s an example: You make a purchase of £600 at 0% interest, spread over 6 months. Your minimum monthly payments will be £100 + £6 + £2 = £108.
Your minimum repayments will be shown on your monthly statement. You can also request a copy of your statement but will be charged a fee of £5.00.
If you’re concerned about missing a payment, contact the PayPal customer service team immediately.
To be eligible for PayPal Credit you must:
Be a UK citizen and at least 18 years old
Have verifiable contact details
Have an excellent credit history
Not recently declared a bankruptcy
Be employed and earn more than £7,500 a year
You can complete a short online application form that offers a quick credit decision. If you're approved, you'll almost immediately have a credit limit connected to your PayPal account.
Keep in mind that when you apply for PayPal Credit, a hard credit check will be performed, leaving a mark that other lenders and credit bureaus can see on your credit report.
Although it is not exactly the same, PayPal Credit works similarly to a credit card agreement. But PayPal Credit is only available online; you won't get a physical card or be able to use it in stores.
Both provide you with the payment option to spread out the price of your purchases across several months. However, any 0% promotional purchase on a credit card typically only applies for a predetermined period of time (like 12 months) and does not reset for each subsequent transaction.
However, this also implies that you will have more time to pay off a large eligible purchase.
A credit card offers purchase protection under section 75 of the Consumer Credit Act, which is another significant distinction. This means that if something goes wrong, any purchases that cost more than £100 but less than £30,000 will be covered.
Although you will benefit from PayPal Buyer Protection, Section 75 purchase price protection is not provided by PayPal Credit. This implies that you might be eligible for a refund if a purchase doesn't come or doesn't fit the seller's description.
Additionally, any unauthorised type of transaction made using your PayPal Credit account won't be your responsibility.
A credit card is the main alternative to PayPal Credit. A credit card with 0% interest on purchases could allow you to spread out the cost of a larger purchase over a longer period, without interest, usually for up to 24 months.
Although you can choose your own payment schedule, keep in mind that interest will start to accrue if you don't pay off your balance before the 0% promotional period expires.
Utilising buy now, pay later is another option. There are other platforms available, each of which functions slightly differently, including Klarna, Clearpay, and Laybuy.
For instance, you might be able to divide the total cost of your purchases into equal portions and pay these off at predetermined intervals (weekly, fortnightly, or monthly).
You might also have a set amount of time during which you can make minimum monthly payments without incurring interest, or you might have a longer payment period that includes interest.
Just be sure to properly read the terms and conditions beforehand.
Some of the benefits of PayPal Credit include:
4-month 0% deal applies to each purchase of £99 or more
Use it at thousands of online merchants
Buyer protection applies
Some cons of PayPal Credit include:
Purchases of less than £99 are charged interest if not paid off each month
Missed payments can affect your credit record
No Section 75 protection
Can only be used online and at certain stores
If you enjoy using PayPal and want to borrow money on credit, PayPal Credit might be something to consider. Each qualified purchase carries 0% interest for four months, which makes it easier for you to spread out the cost over time.
The major drawback is that each purchase must total £99 or more in order to qualify for this feature, thus anything below that will result in interest charges. If you don't finish paying for your item within four months, interest will be added.
In some circumstances, instalment offers may provide you with better discounts, but keep in mind that not all merchants will provide them. Because PayPal Credit is only available online, it is also rather rigid, and you might be better off using a credit card.