What is PayPal Credit and how does it work?

Adam Rozsa

PayPal Credit is a digital, reusable credit line you can apply for wherever PayPal is accepted. If you’re making purchases of 99 dollars or more, you could get free credit for up to 6 months, giving you longer to cover the costs of your purchase. There’s no annual fee - but you’ll have to make sure your account is paid in full within 6 months, or interest will be charged.

💡 A couple of important points before we get started. PayPal Credit isn’t a credit card. Learn more about the PayPal Credit card here - and get the guide to the PayPal Prepaid Mastercard here.

If having a physical card is important, you might prefer a debit card option, which lets you cut the costs of shopping online with your favorite international retailers. Check out the Wise multi-currency account and card to avoid foreign transaction fees, save on international spending, and have more left for yourself in the end.

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📝 Table of contents

How does PayPal Credit work?

Here’s how you can use PayPal Credit to either buy online or send a payment to someone using your PayPal account.

Purchases with PayPal Credit

Apply for a PayPal Credit line of credit, and if you’re approved, it’ll be automatically added to your PayPal account. You can then shop online with your favorite stores and use the line of credit to pay for your purchases. Just select the PayPal Credit option when it comes to time to pay¹.

Sending money with PayPal Credit

To send money with PayPal Credit, simply log into your PayPal account, and when you’re setting up your payment, click on PayPal Credit as your preferred way to pay. It’s that simple².

If you’re sending in USD, you’ll be charged the same as you would be using a credit or debit card, although it’s good to know that this is treated as a cash advance and incurs interest from the point of making the payment. Also, there are currency conversion costs if you’re sending money abroad. We’ll touch on the full fee structure a little later.

what is paypal credit

How to apply for PayPal Credit

You can apply to PayPal Credit online and get a decision in seconds.

  • Log into your PayPal account and click Apply for PayPal Credit
  • Enter your personal details including date of birth and SSN
  • Check and confirm everything is correct
  • Your account is verified instantly, and you’ll get a decision

If approved, you can start to shop with PayPal Credit immediately.

Where can I use PayPal Credit?

Interested in accessing PayPal Credit? Here’s where you can use the service.

How to use PayPal Credit in store

PayPal is a giant in online payments. Unfortunately, though, PayPal is not generally accepted in brick and mortar stores. That means your PayPal Credit line can not be used in physical stores - only online ones.

How to use PayPal Credit online

So now you’re wondering how to use PayPal Credit online. The good news is that it’s easy. Use your PayPal Credit line in any ecommerce store that accepts PayPal. Just checkout using PayPal and select PayPal Credit as your preferred method of payment.

what is paypal credit

PayPal Credit fees

It’s important to know that PayPal Credit is not a free service. Depending on how you use it, you may find that there are fees and interest to pay. Here are some important points to note. Check out the full terms and conditions online before you sign up.

When does interest start to accrue?

The first point to note is that when interest starts to be charged can vary. The PayPal Credit headline is that you’ll not be charged interest on purchases of 99 USD or more for 6 months. However, there are charges in other cases:

  • Purchases of under 99 USD accrue interest from the date of purchase
  • Send money transactions accrue interest from the date of purchase
  • Interest will be added from the date of purchase if you spend 99 USD or more, but do not pay it off in full in 6 months

All that said, depending on how you manage your PayPal bills you may not end up needing to pay interest on your PayPal Credit account. Make sure your credit line is paid off in full in every billing cycle to cut your costs overall.

PayPal Credit fees and interest

Cost typePayPal Credit fee³ ⁴
Interest (APR)23.99%
Minimum interest charge2 USD
Late payment feeUp to 40 USD
Returned payment feeUp to 29 USD
Sending payment domestically (PayPal fee)2.9% + fixed fee
Sending payment internationally (PayPal fee)4%

what is paypal credit

PayPal Credit pros & cons

Before you sign up to PayPal Credit, take some time to assess and weigh up the pros and cons. There could be costs to pay for the services on offer - and there are also alternatives out there which may suit you better. More on that in a moment. Here are some PayPal pros and cons.


  • Quick credit decision
  • Extremely easy to use for online shopping
  • Use to send payments to friends and family (not suitable for sending to self)
  • Fee free for 6 months on purchases of 99 dollars or more


  • Can't be used in stores, no physical card available
  • No interest free period on purchases under 99 USD or cash advances to friends and family
  • PayPal additional costs apply when sending to friends and family, including transfer fee and currency conversion costs

Who is PayPal Credit best for?

If you’re making purchases of 99 dollars or more and know you’ll be able to clear your bills in 6 months, PayPal Credit is a handy tool. It may also be useful if you’re sure you can pay off your bills every billing cycle, as this will cut the costs of interest. However, it is important to note the potential fees with this service - like any other line of credit. Fall behind on your payments and the penalties and interest can accrue quickly.

Sending payments to friends and family using PayPal Credit also involves extra costs due to the transfer fees, and currency conversion charges if you’re sending overseas. Check out the full range of fees before you sign up.

Alternatives to PayPal Credit

If a buy now, pay later service is definitely what you want, do check out the competitors to PayPal Credit to see if any may suit you better. Big names to start with include Afterpay, Sezzle, Klarna and Quadpay.

📖 Check out these alternatives

Alternatively, you can avoid the potential costs of using a line of credit by sticking with a debit card. Using a specialist card - like the Wise multi-currency account and card - can also save you money versus using a regular debit card. Use your Wise account to hold and convert currencies using the mid-market exchange rate, and then spend online using your linked card, with no foreign transaction fees.

You’ll also find that sending payments to friends and family overseas with Wise is a convenient and low cost alternative to using your PayPal Credit line.

Open a free Wise account today

what is paypal credit

Frequently asked questions

PayPal Credit has a handy FAQ section - and we’ve also rounded up a couple of key questions here to start you off.

Is PayPal Credit good?

PayPal Credit is a handy tool if you want to shop online with PayPal. It’s best for bigger purchases over 99 dollars, and if you repay your bills in full every cycle or within the promotional period. Otherwise, you’ll pay interest and could be subject to late penalties.

Does PayPal Credit affect credit score?

Whenever a hard credit check takes place, it is reported to credit bureaus, which can impact your credit score. PayPal Credit is offered through its banking partner, which does share your information with credit bureaus. That can mean that using PayPal Credit may affect your credit history and score.

Depending on your personal preferences and needs, PayPal Credit might be a helpful way to spread the cost of big ticket items across 6 months. However, it’s not the only buy now, pay later service out there, so it’s worth comparing a few if that’s what you’re looking for.

If you just need a handy way to cut the costs when spending online - especially with international retailers - a debit card may suit you better. Take a look at the Wise multi-currency account and card to learn more.

Learn more about Wise


1]PayPal Credit - Main Website
2]PayPal Credit - FAQ
3]PayPal Credit - Terms and Conditions
4]PayPal - Fees

All sources checked on 23 July 2021

Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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