“PayPal Credit,” the new name for PayPal’s “Bill Me Later”, is exactly what it sounds like: it’s a line of credit 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 are approved, you can access a credit of at least $ 250, and in some cases you might get a small bonus, such as a $ 10 refund.
Available anywhere that accepts PayPal, “as well as thousands of other online stores,” PayPal Credit allows you to defer payment for purchases for up to six months without any interest.
No doubt this will be of interest to some people, but there are a few reasons why you should be hesitant to sign up.
• It is a line of credit. As such, setting it up will result in a thorough investigation of 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 is a charge, plus a relatively high APR of 19.99%.
• Currently, a customer service representative explained over the phone that PayPal does not report your credit activity to the credit bureaus after the initial request to set you up, which means your activity on that line of credit does not affect your credit rating. Bad debts don’t damage it, but good behavior doesn’t improve it. Take it as you want.
• After your initial $ 10 (if you get this offer), there are no major bonuses like a cash back card or miles. The main reward of this line of credit is that you have more time to pay off your balance, and for many consumers, that’s not very impressive.
In short, PayPal Credit is pretty harmless, but also pretty useless.
The best thing you get out of a line of credit is a longer time to pay for larger purchases, but if you can’t pay for discretionary items in cash today, you should not buy them.
Signing up can also lead consumers to buy more: TechCrunch reported that PayPal users spend 30% more after taking out a loan. This is not exactly a good thing.
If you have money and you just don’t want to hand it over, the waiting period always introduces an element of human error, i.e. the possibility of you forgetting to pay your bill.
Even if you decide that you really need to buy this product right now (or if you’ve calculated it and decided that the money you don’t use to pay that individual bill will get better returns if it’s invested over a relatively short period of six months), the only reason you would do it with a line of credit that does not affect your credit score is if you are trying to disguise bad credit behavior, that is, say you expect to be unable to pay. And if you aren’t able to pay when the bill comes in, like with any credit card, it will cost you a fortune.
PayPal in its original form is pretty handy enough – so why don’t you just stick with that?