How does PayPal work and can you ‘buy now, pay later’ with it?

Dealing with your money online is always a hassle. While there are many options available — like banking apps, Venmo, Zelle, and CashApp — there often seem to be some problems or lacking features. Sometimes it is the user interface, sometimes there are high transfer fees. However, there is one longstanding, popular choice for making online purchases: PayPal. PayPal is an online payment system where you can make purchases or even receive payments without giving out your banking information to third-parties. Considered a digital wallet, paying for items with PayPal often means faster checkouts and more security.

The mobile banking giant has been around for years, and is going stronger than ever, mixing up traditional online banking with modern mobile payments and transfers. PayPal encrypts your payment data, so you can check out at an online store without ever sending them your debit or credit card numbers. Besides using PayPal for online shopping, you can use the platform to receive money for something you sold or a service you provided. PayPal also offers some buy now, pay later options. Here’s everything you need to know about PayPal.

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PayPal encrypts your financial data, so you can shop without sharing sensitive data

PayPal

Simply put, PayPal works by encrypting your financial data, so you can make payments or receive money without sharing your sensitive banking information. PayPal also works like a digital wallet, which often means checking out with PayPal is often faster, since you just need to log in and don’t need to retype your payment information or shipping address.

PayPal’s services fall into six key categories:

Pay for items

PayPal is one of the most well-established and widely used digital payment systems. It’s an online financial service that enables you to pay for items using a secure internet account. You simply add your bank account, credit card or debit card details and whenever you pay using PayPal, you can choose which of your cards or accounts it pays with. You can also set one to be the default payment method and that will be used unless you choose otherwise.

Receive pay

In addition to paying for items using PayPal, you can also receive money through the service. Any money received sits in your PayPal account and can be used when paying for something, with the balance topped up by your assigned cards or bank account.

For small businesses, PayPal Zettle is a platform that allows businesses to accept card payments in person.

Transfer or send money

Alternatively, you can transfer any positive balance in your PayPal account to one of your assigned bank accounts or cards.

There can be a fee applied when you receive money in your PayPal account, but it’s largely free to use when buying something. It is free to send money to friends or family through PayPal accounts too, as long as there is no currency conversion required.

PayPal Buy Now, Pay later

PayPal also runs its own credit card-style facility for users, with the option to pay for products using credit to pay back later.

Discounts

To top it all off, you also get some great deals when paying with PayPal. Not only does the platform offer great cashback opportunities, the discount code extension Honey is also a part of PayPal now. That means it’s well-integrated into the platform, helping you save even more by finding eligible coupons and discount codes for your PayPal purchases.

PayPal for businesses

There are also business PayPal accounts available, which you can find out more about here. PayPal enables many businesses to accept card payments.

Can you ‘buy now, pay later’ with PayPal?

PayPal offers two different ways to pay for purchases on a later date

PayPal offers two “Buy Now, Pay Later” options: ‘Pay in 4’ for smaller purchases ($30 to $1,500), allowing customers to make four interest-free payments bi-weekly, and ‘Pay Monthly’ for larger purchases, offering 6, 12, or 24-month plans with APRs ranging from 9.99% to 35.99%. A soft credit check may be conducted but won’t impact your credit score. Both plans feature no sign-up or late fees, and payments can be made via debit card, credit card, or a confirmed bank account.

How to get a PayPal account

Signing up for PayPal is a simple process that requires creating an account and linking your payment information

PayPal

It’s easy to sign up for a PayPal account. You head to PayPal.com and click the Sign up button. It’ll ask if you want to sign up for a personal or business account and away you go. Don’t forget to have your bank, credit or debit card details on hand. The process is incredibly straightforward and, after registering with your email address, allows you to start banking in a matter of minutes.

1. Visit PayPal website at PayPal.com.
2. Click the “Sign Up” button on the homepage.
3. Choose your account type, either a personal or business account.
4. Create your log-in details by providing a username and password.
5. Verify your identity and provide details including your name, birthday, and address.
6. Link your credit or debit card. Have your bank, credit, or debit card details ready to enter.
7. Register email: Complete the registration process with your email address.
8. Optional: PayPal will ask for your mobile phone number. This is in order to send you alerts on unusual activity, or to reset your password.
9. After completing these steps, you can begin using your PayPal account.

How to use PayPal to pay for items

You can use PayPal to pay online or in person

PayPal

When paying online, you just need to look for the PayPal symbol and click on the button that says to check out with PayPal. This allows you to check out by logging into your PayPal account rather than sharing your payment information.

Not every online retailer accepts PayPal; for example, Amazon doesn’t directly accept PayPal. While you can’t check out at Amazon by logging into your PayPal account, you can sign up for a PayPal debit card that’s linked to your PayPal account balance. You can then use this debit card number when checking out online, or use the physical card in a store, to pay with PayPal from a store that doesn’t directly support the platform.

If you download the PayPal app, you’ll see even more options. Thanks to many partnerships with stores and restaurants in your area, you get different options for how to pay for products, food or gas, and even order ahead to beat the queues in some food establishments and coffee shops. The app shows you a list of all the vendors nearby that accept different PayPal options.

Using PayPal for online payments

1. At checkout on a website, choose PayPal as your payment method.
2. Log in to your PayPal account when prompted.
3. Review and confirm the payment details and complete the transaction.

Using PayPal for in-store payments

You can use your PayPal account to pay in physical stores where PayPal is accepted. Another option is to request a PayPal debit card, which is linked to your PayPal account balance and used like a regular debit card.

1. Look for stores that display the PayPal acceptance symbol.
2. At checkout, let the cashier know you wish to pay with PayPal.
3. Depending on the store’s technology, you might scan a QR code using your PayPal app, or use a PayPal card linked to your account.

Using the PayPal app:

1. Open the PayPal app on your mobile device.
2. Use the app to find nearby stores or services that accept PayPal.
3. Choose your preferred payment method within the app (like PayPal balance, linked bank account, or cards).
4. Complete the transaction as directed by the app.

What is PayPal Credit?

PayPal Credit is a digital line of credit

PayPal

• Type: Digital credit line (not a physical card).
• Credit Check: Yes, subject to credit approval.
• Features: No interest on purchases of $99+ if paid in full in 6 months.
• Usage: Online, wherever PayPal is accepted.
• Fees: No annual fee.

PayPal also runs its own credit service, PayPal Credit, where you can pay for items using PayPal but pay for them later.

It is a digital, reusable credit line offered by PayPal that can be used for online purchases where PayPal is accepted. It offers the flexibility to pay over time. There is no physical card associated with PayPal Credit; it’s entirely online, integrated into your PayPal account for convenience. It charges a typical (variable) purchase interest rate per annum, much like any credit card or loan, but as an incentive, you get 0 percent interest on purchases of over $99 if you pay in full within six months. So, if you pay it back within that time, it won’t cost you more than the original purchase price.

Some stores offer special deals when paying for products using PayPal Credit, with reduced interest rates depending on the retailer.

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Does PayPal offer a physical card?

PayPal has three options for physical cards

PayPal

Yes, PayPal offers the following physical cards:

1. The PayPal Cashback Mastercard: A physical credit card that offers 3% cash back on PayPal purchases and 2% on other transactions, with no annual fee. A credit check is required for approval, and it includes the usual Mastercard security features.
2. The PayPal Debit Card: A physical card linked to your PayPal Balance, doesn’t typically require a credit check. It’s accepted everywhere Mastercard is and allows free withdrawals at MoneyPass® ATMs, all without monthly fees or minimum balance rules.
3. The PayPal Prepaid Mastercard: This is easy to get since it doesn’t require a credit check. It’s a physical, prepaid card, ideal for managing your spending without overdraft fees, and it comes with a fee structure typical for prepaid cards.

Does Paypal charge a fee?

PayPal charges fees, but shopping online typically doesn’t come with any fees

Many PayPal users can use the service without paying a fee. Making a purchase using your PayPal account doesn’t come with any fees, provided you aren’t using PayPal Credit. You can also send money to a friend without any fees if you use your PayPal balance or a debit card and are sending money in the same currency.

So where does PayPal make its profit? The stores and businesses that accept PayPal pay a small fee for each transaction, with a percentage of the payment going to PayPal. If you use PayPal to accept a payment, maybe because you sold something on eBay or to be paid for your side gig or small business, you will pay a small percentage of the payment to PayPal for using the service. PayPal Credit also comes with fees if you don’t meet the interest-free requirements. PayPal also has fees for converting to a different currency and buying cryptocurrency. For the full list of fees, visit PayPal’s fees page.

Why should you try PayPal?

PayPal is widely accepted and has buyer protections in place

PayPal

While there are plenty of online payment systems these days, such as Apple Pay and Google Pay, PayPal offers a few additional benefits that others might not.

Widely accepted

To begin with, its age means it is well-established and widely accepted, even by smaller retailers. You will find a Pay by PayPal option on thousands of websites that do not offer the same for Apple Pay or other digital financial services. You can also use PayPal beyond the retailers that allow the payment platform by requesting a PayPal debit card and using it anywhere that accepts MasterCard.

Buyer protection

PayPal’s buyer protection safeguards will also ensure you get a refund if an item you buy online doesn’t arrive or doesn’t match a seller’s description. Those selling items on a personal or business level and are paid through PayPal are also protected. For example, if you can provide proof that you sent an item by post yet the buyer claims not to have received it, you get to keep the full payment.

Layer of security

Another reason to use PayPal is that it offers an additional layer of security to payments. As you do not have to enter your card details or CCV number each time you purchase something, just your PayPal login and password or mobile number and PIN, the online store does not have your details in its database.

OneTouch

Sometimes you can also use OneTouch payments, where PayPal keeps you logged in if you activate the service, and you do not have to enter your details each time you purchase something, no matter which store. That’s because it is specific to a device and browser. For example, if you enable OneTouch on your PC, it will only work when you use that specific computer and the same browser. This makes checking out online faster, and you don’t have to leave the couch to go grab your wallet.

Dedicated PayPal apps

There are dedicated PayPal apps for iPhone and Android devices — each with biometric security for extra protection.

Loyalty cards

You can add loyalty cards to your PayPal account, in order to gain loyalty points whenever you pay for something using the app.