How Does PayPal Work? Everything You Need to Know to Ease Your Payments

Aug 27, 2020 04:00 PM

How Does PayPal Work - Photo by mohamed Hassan from Pixabay
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You can maximize the function of your mobile phone for everything, include financial matters.

You may have known that PayPal has been in the mobile payments business for over a decade. Paypal is an online financial service that allows you to pay using a secure internet account.

When using PayPal, you can add more than one of your bank accounts, credit card, or debit card details. Decide which of your cards that you will use to pay, even you can set default payment.

Learn more about what is Paypal, PayPal credit, how does PayPal work, and find the difference between PayPal and bank-issued credit cards.

What is PayPal account and how does it work?

How Does PayPal Work - Photo by CopyrightFreePictures from Pixabay

Imagine, in nowaday world, you can shop online or pay online without needed to use a credit or debit card. This will highly beneficial and increase security. You won't be at risk of physical theft or credit card fraud.

That's exactly what PayPal Credits has offered us to do the payment on the internet. It's strongly related to e-commerce and online banking. Then, how does PayPal work?

PayPal Credit or widely known as PayPal Bill Me Later is a virtual credit card. You will not get physical cards or people usually say credit cards without plastic. This online payment was first launched in 2008 and the one that exists until now results from a rebranding in 2015.

PayPal Credit is a hundred percent internet-based. It is automatically linked to your PayPal account and function as an online payment option you usually use. PayPal is in the credit business, unlike Visa and traditional credit cards that can be used in brick-and-mortar stores.

As one of the benefits of PayPal Credit, it is a particularly fast process. You do not even need to wait for a physical card to arrive in your hand, you just need to fill online application and get approval. Now, let's move to the next section to answer "how does PayPal work?"

How Does PayPal Credit Work?

First, how does PayPal work, for a PayPal credit? PayPal is a line of credit that launched by Synchrony Bank. When using PayPal Credit, you will be required monthly payments on your balance.

You can choose whether you want to make minimum payment at the end of the month, or make payments in any other amount whenever you want to. You can also balance in full at any time, just similar to a credit card. If you are just a new user of PayPal, the PayPal credit has variable APR OF 25,49% on standard purchases and cash advances.

Currently, PayPal credit promotes 6-months financing offers where you won't have to pay any interest on the purchase of $99 or higher for 6 months. If you pay the balance in full within 6 months, then you will be charged.

PayPal Credit will charge a flat fee of 2,9% plus $30 US dollars per transaction when you send mone (Cash Advanced) using PayPal. You will find the same fee when sending money using debit or credit cards through PayPal.

How Does PayPal Work? (PayPal Credit vs Credit Card)

Though each PayPal credit and bank-issued Credit Card has its own convenience, the main difference of them is how it affects your credit score. PayPal will make a hard inquiry on the credit report. This might temporarily decrease your credit score by a few points.

While PayPal credit never reports any activities to your credit bureaus. What does it mean? If you are late with the payment or default on balance, your score will not be affected in a negative way. But things you should remember is PayPal Credit will charge you up to $27 if you are late.

Moreover, PayPal doesn't offer any rewards that you may get from bank-issued credit card usages like cashback or reward points. Instead, users will be offered such promotional things including reduced interest-rates or interest-free periods on certain payments.

Where You Can Use PayPal Credit?

How Does PayPal Work - Photo by OpenClipart-Vectors from Pixabay

After you know how does PayPal work, you might want to know how to use PayPal credit. You can use PayPal Credit in many online sites where PayPal is allowed. Nowadays, most business or stores accepts standard PayPal payments, so you will not be worried about that matter.

Popular stores like Walmart, Home Depot, Best Buy, Amazon, Overstock, and many more are accepting PayPal payment method.

PayPal credit can also be used for Business Purchases. But, if you only have a very small enterprise, it is better for you to use a traditional line credit to make purchases.

This is because PayPal Credit geared towards consumers, so the credit limits on this method are on the low side and APRs on the high side. The solution is now PayPal Credit offers a small business loan ranging from USD 5000 up to USD 500,000.

So, that's all everything you need to know about the question "How does PayPal work?". If you wonder how to withdraw or how to receive money from PayPal, you can check here and here.

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