Paypal Buyer Credit is a Big Mistake

Posted by CreditCardGuru

There are a few reasons why I hate Paypal. First of all, it’s extremely annoying how every time you go to make a purchase, they set your bank account as the default method…

Paypal payment

You can’t set your credit card as the default, so you have to go thru this hassle and manually change it every time.

The reason they try and force this upon you is because it costs more for them to process credit cards (versus electronic bank account withdrawals).  And then even when you select credit, often times they still try and convince you one more time with another screen to use your bank account.

And last but certainly not least, one more reason to hate them is their Paypal Buyer Credit. It seems like whenever I pay for an eBay auction, they try and peddle this. Take a look at the terms and conditions to see how rotten of a deal it is…

Problem #1. Nearly a 27% APR

You gotta love GE Capital Retail Bank and their outrageously high interest rates. On the Paypal Buyer Credit/Smart Connect, they charge you 26.99%. I definitely don’t advocate going into debt for some eBay purchase, but if you’re going to do it, then this is probably the most expensive way to go about it.

buyer credit interest rate

Problem #2. The promotional financing offers are crap

As I write this review, there are 5 different offers available in 2013. Here’s what you need to know about each of them.

  • No interest if paid in 3 months and no payments for 3 months for total purchases over $199.00

Now this one is real sneaky. The only way you get “no interest” is if your purchase is paid off within the first 3 months. If it takes you longer than 3 months, then you will pay deferred interest at 26.99% going back to the date of the purchase. Of course, Paypal confusingly says there are “no payments for 3 months” which is true, but if you take them up on that part of the deal then it means you will be hit with deferred interest after the 3 months is up.

  • No interest if paid in 6 months for total purchases over $199.00 USD (monthly payments required)
  • No interest if paid in 12 months for total purchases over $199.00 USD (monthly payments required)

These two are better but they’re not always 0% interest. If you pay off the full purchase within the allotted time (6 or 12 months) then you really will be getting no interest from your Paypal Buyer Credit account. But if takes you longer than the allotted time to pay off any of it, then you will be slapped with the deferred interest on the full amount.

  • 12 fixed monthly payments at 12.9% APR for total purchases over $999.00 USD (available in select categories)
  • 24 fixed monthly payments at 12.9% APR for total purchases over $1,999.00 USD (available in select categories)

These two are more transparent, but by no means a deal. Since they’re fixed monthly payments, as long as you keep those up you won’t have to be worry about any deferred interest later on. However, you will be paying the 12.9% from day 1 no matter what with these two promos.

If you currently have a balance on your Buyer Credit from Paypal and can’t pay it off before the deferred interest kicks in, then move it over to a no balance transfer fee credit card with 0% interest.

Problem #3. You’re not getting the same protection and benefits

Yes, there is the eBay Buyer Protection policy, but that coverage falls short compared to what many credit cards offer:

  • Purchase Protection: On eligible brand new items you pay for with your card, this benefit covers you for the first 90 days in the event you accidentally damage the item or it gets stolen.
  • Extended Warranty: With this perk, the manufacturer’s warranty on eligible items will automatically be extended. The way it works varies by card, but typically you get up to 1 year extra of coverage on warranties that are 3 years or less in length.
  • Return Protection: Some online retailers don’t accept returns. With this benefit, you can return your eligible new purchase to the credit card company within the first 60 days if the retailer won’t take it back.

Now if you pay using the Paypal Buyer Credit, you will be missing out on these benefits. You will also be missing out on the cash back or other rewards you could be earning.

If you want these types of benefits and good rewards, then consider getting a Visa Signature or an American Express.

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