“PayPal Credit,” the new name of PayPal’s “Bill Me Later,” is exactly what it sounds like: It’s a credit line that you can access through PayPal.
When you apply for PayPal Credit, you provide your date of birth and the last four digits of your Social Security number, and their partner Comenity Capital Bank will let you know if you’re approved “in seconds,” according to their FAQs. If you’re approved, you can access at least $US250 worth of credit, and in some cases you might get a small bonus, such as $US10 back.
Available anywhere that accepts PayPal, “as well as thousands of other online stores,” PayPal Credit lets you hold off paying for purchases for up to six months without any interest.
No doubt, this will interest some people, but there are a few reasons why you should hesitate to sign up.
• This is a line of credit. As such, setting it up will make a hard inquiry on your credit report, which may temporarily lower your credit score by a few points.
• Like any credit card, PayPal Credit will charge you for late payments. In this case, it’s a fee, plus a relatively high 19.99% APR.
• Currently, a customer service rep explained on the phone, PayPal doesn’t report your credit activity to the credit bureaus after the initial inquiry to set you up, which means your activity on this line of credit doesn’t affect your credit score. Delinquencies don’t damage it, but good behaviour doesn’t improve it. Take that as you will.
• After your initial $US10 (if you get that offer), there aren’t any major bonuses like a cash-back or miles card might provide. The chief reward for this line of credit is that you get extra time to pay your balance, and for many consumers, that isn’t very impressive.
In short, PayPal Credit is fairly innocuous, but also pretty unnecessary.
The best thing you get out of the line of credit is increased time to pay for larger purchases, but if you can’t pay for discretionary items in cash today, you probably shouldn’t be buying them.
Signing up also may lead consumers to buy more: TechCrunch reported that PayPal users spend 30% more after signing up for credit. That’s not exactly a good thing.
If you have the money and just don’t feel like handing it over, the waiting period still introduces an element of human error — that is, the chance for you to forget to pay your bill.
Even if you decide you really need to buy said product right now (or you’ve calculated it out and decided that the money you aren’t using to pay this individual bill will get greater returns if it’s invested over the relatively short span of six months), the only reason you’d do it with a credit line that doesn’t affect your credit score is if you’re trying to disguise bad credit behaviour, i.e. expecting to be unable to pay. And if you’re unable to pay when the bill comes through, like with any credit card, it’s going to charge you a fortune.
PayPal in its original form is already pretty convenient — so why wouldn’t you just stick with that?
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