With its foundation in person-to-person payments, PayPal has built a solid reputation as a trusted source for sending money online. The platform has expanded its presence in the global economy, connecting consumers to retailers through its credit options: PayPay Credit and PayPal Mastercard.
One functions as a virtual credit line, while the other is a traditional credit card. Both make a solid case for consumers, but a deeper dive into the details makes it clearer when to choose which.
How Each Option Works
Both PayPal Credit and the PayPal Cashback Mastercard are issued by Synchrony Bank. PayPal Credit, a digital credit line, can be used to make credit purchases anywhere PayPal is accepted once you’ve connected it to your PayPal account. You can reuse your existing credit line over and over with participating retailers, rather than applying for new credit with each use.
The PayPal Cashback Mastercard also allows you to make credit purchases, but with all the features of a traditional credit card. You can swipe or dip your card for in-person purchases or enter your billing information for online purchases. Like PayPal Credit, you can connect the credit card to your PayPal account and use it as a funding source with retailers that accept PayPal.
Where Can You Use Each Option?
Because it’s a co-branded credit card, the PayPal Cashback Mastercard can be used anywhere Mastercard is accepted, giving you greater flexibility in using your credit account. International travelers can use their card outside the United States with no additional foreign transaction fee.
Cash advances are an option, but with a current cash advance APR of 28.74% (variable), plus an additional cash advance fee, using your credit card for cash advances should only be considered in a pinch.
By comparison, PayPal Credit has somewhat limited usage. You can only use your credit account with retailers that accept PayPal, which may not be an option for many of your daily purchases. On the plus side, you don’t need an actual credit card to make purchases, and you won’t have to enter an account number to checkout. There’s less risk of your credit card being lost or stolen or your credit information being compromised in a data breach.
If you’re looking for the opportunity to pay off purchases over time with no interest, PayPal Credit offers six months special financing on purchases over $99 every time you shop. Transactions under $99 must be paid in full to avoid interest. Otherwise, finance charges will be assessed based on the regular APR.
While you can make minimum monthly payments, that may not be enough to pay off your balance in six months. Interest is deferred, so if you don’t pay your balance in full within six months, interest will be charged to your account from the purchase date.
A second special financing option, called Easy Payments, may be available with some retailers. With Easy Payments, you have the option to pay off purchases over $30 in three equal payments.
Unfortunately, there’s no introductory interest rate available with the PayPal Cashback Mastercard. The card terms note that it offers periodic special financing promotions and no interest for up to 18 months, but it doesn’t say when those offers will be made available.
Consumers who enjoy earning rewards will find the PayPal Cashback Mastercard an attractive option. Purchases earn a flat 2% cash rewards, rivaling other flat cash rewards rates on the market. Another perk of earning rewards with the PayPal Cashback Mastercard: no bonus categories to keep up with and no sign-ups necessary to earn rewards. Since you can use your card for both online and offline purchases, you have more opportunities for earning rewards.
You can redeem your rewards in any amount, and upgrading your PayPal account to PayPal’s Cash or Cash Plus programs allows you to use your rewards through your PayPal balance. Otherwise, you can transfer rewards to your bank account to use them.
No rewards are offered with PayPal Credit.
You can use PayPal Credit or the PayPal Cashback Mastercard (linked to your PayPal account) to send money to family and friends for an extra fee of 2.9% plus $.30 for each transaction.
Sending money with PayPal Credit counts as a cash advance, not a regular purchase. You won’t get any promotional financing, even for transactions over $99. Plus you’ll be charged the regular cash advance APR. (Currently, however, both APRs are the same.)
Features and Protection
PayPal offers purchase protection for all purchases made through the platform, with a few exclusions for things like real estate, motorized vehicles, prepaid cards, and custom-made goods. Purchase protection on eligible purchases reimburses you for the full purchase amount plus shipping costs.
The PayPal Cashback Mastercard also comes with a few Mastercard benefits, including ID Theft protection, Mastercard Global Services, and Mastercard Airport Concierge.
Fees and Interest
For new PayPal Credit accounts, the APR for purchases and cash advances is currently 25.74%, varying with the Prime Rate. There’s no annual fee, and you’ll be charged a late fee up to $39 if you miss a payment. If you’re approved, PayPal says you’ll start out with a minimum credit line of $250, with the possibility for a credit limit increase from time to time.
The PayPal Cashback Mastercard currently offers an APR of 21.74%, 25.74%, or 28.74% (variable), depending on your creditworthiness. Like PayPal Credit, there’s no annual fee, but you’ll be charged up to $39 for late payments.
Where Each Option Shines
While many credit cards offer a 0% introductory rate on purchases, the promotional rate is only offered on purchases made within the first few months of opening your account. PayPal Credit allows you to take advantage of the interest-free period again and again as long as your transactions are above the $99 threshold.
If you are more interested in earning cash back rewards or want more flexibility in using your credit card, the PayPal Cashback Mastercard is the better option. Flat-rate cash rewards are easy to earn, plus you have several opportunities to earn rewards on purchases.