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PayPal Credit Card Processing: How to Accept Card Payments

PayPal Credit Cards

PayPal credit cards are a popular payment option that allow you to make purchases and pay over time, interest-free. PayPal offers two main credit cards: the PayPal Credit Card and the PayPal Extras Mastercard. In this blog post, we’ll take an in-depth look at how PayPal credit cards work, their benefits, and potential downsides to consider. PayPal is one of the most popular online payment processing solutions, allowing businesses to accept credit card payments quickly and easily. With PayPal, you can start accepting card payments right away without the need to apply for a traditional merchant account. This makes it an ideal option for small businesses and those just starting out selling online. In this article, we’ll walk through everything you need to know to get set up with PayPal credit card processing.

What is PayPal Credit?

PayPal Credit (formerly known as Bill Me Later) is a virtual credit line offered by PayPal that allows you to pay for purchases over time. When you make a purchase using your PayPal Credit account, you have the option to pay the full amount right away or pay over 6 months interest-free. PayPal Credit works by allowing you to make a purchase now and pay for it later. As long as you pay the minimum amount due each month, you won’t incur any interest charges.

Also Read: Stripe ACH Fees: Everything You Need to Know

Benefits of PayPal Credit Cards

  • 0% APR for 6 months on purchases over $99 when you choose PayPal Credit at checkout. This gives you an interest-free way to make large purchases and pay them off over time.
  • No late fees. PayPal won’t charge you a penalty for missing a payment. However, late or missed payments can still impact your credit score.
  • There is no annual fee. There is no yearly fee to have a PayPal credit account.
  • Buyer protection. Purchases made with PayPal Credit are eligible for PayPal’s Purchase Protection program. This provides coverage in case you never receive your order or the item is not as described.
  • Can be used anywhere PayPal is accepted. Since it’s a virtual credit line, you can use PayPal Credit at millions of online and in-store retailers.
  • Earn cash back. The PayPal Extras Mastercard offers 3% cash back on purchases in certain categories. You can redeem your cash back towards your PayPal balance or statement credit.

Also Read: Stripe alternative payment methods

Potential Downsides

  • Requires a PayPal account. To apply and use PayPal Credit, you need an existing PayPal account. If you don’t have one, you’ll have to set it up first.
  • A credit check is required. When applying for PayPal Credit, PayPal will perform a soft credit inquiry which can impact your credit score. You need good to excellent credit for approval.
  • High APR after the promotional period. The 0% APR is only for the first 6 months. After that time, the variable APR is currently 19.99% to 29.99% based on creditworthiness. The high interest rate makes this credit line risky if you can’t pay off the balance in full.
  • Limited purchase protection. PayPal’s protection only covers eligible purchases and has limits. For example, coverage is limited to $30 for tangible items. Purchases also have to be made entirely with PayPal Credit to qualify.
  • Can only be used at PayPal merchants. Since it’s not a physical credit card, PayPal Credit can only be used at retailers that accept PayPal. It has limited usage compared to a general-purpose credit card.

Also Read: What is a payment Gateway API and How Does It Is work?

Why Choose PayPal for Credit Card Processing?

Several key benefits make PayPal an attractive credit card processing option:

Fast setup: You can sign up for a PayPal account and start accepting payments in just a few minutes. There is no lengthy merchant account approval process.

No monthly fees: PayPal has no regular monthly fees like traditional merchant accounts. You only pay transaction fees per sale.

Accepts all major cards: PayPal allows you to accept Visa, Mastercard, American Express, Discover cards, and more.

Seamless integration: PayPal offers plugins and APIs to easily integrate into your website, shopping cart, invoicing system, and more. 

Mobile processing: Accept payments on the go with the PayPal Here app and mobile card reader.

Global reach: PayPal makes it easy to sell to customers worldwide in multiple currencies. 

How PayPal Processing Works?

When a customer pays with a credit or debit card through PayPal, the funds from the transaction are deposited into your PayPal account. You can then transfer the money from your PayPal balance to your regular business bank account.

Here is an overview of how PayPal processing works:

  1. The customer selects PayPal as the payment method at checkout.
  2. The customer is redirected to PayPal to log in or provide card details.
  3. PayPal verifies customer information and processes payments.
  4. Funds are deposited in your PayPal account.
  5. Transfer funds from PayPal to your bank account.

PayPal offers both PayPal Payments Standard and PayPal Payments Pro:

  • PayPal Payments Standard allows you to accept PayPal payments through a payment button or checkout flow hosted by PayPal.
  • PayPal Payments Pro provides you with your own fully hosted and customizable checkout pages while still processing payments through PayPal.

Transaction Fees

PayPal charges transaction fees for processing payments. The fees vary depending on your account type, sales volume, and the type of transaction. 

Here are PayPal’s standard transaction rates:

  • PayPal Payments Standard: 2.9% + $0.30 per transaction
  • PayPal Payments Pro: 2.4% + $0.30 per transaction (volume discounts available)

There are no setup costs or monthly fees. You’ll simply pay the transaction rate for each payment you accept. PayPal also has micropayment pricing for transactions under $10.

Accepting Recurring Payments

Many businesses need to accept recurring or subscription payments from customers. PayPal makes this easy through its automated recurring payment tools. To accept recurring payments with PayPal, you can utilize:

Billing agreements – Customers authorize future payments to occur on a set schedule.

Reference transactions – Use past transactions as a payment “template” for future recurring charges. You can manage recurring billing entirely through your PayPal account dashboard. PayPal will automatically bill customer cards on your set schedule and notify you of any failed payments.

Getting Started With PayPal

Ready to dive in? Here are the basic steps to get started accepting credit card payments through PayPal:

1. Sign up for a PayPal business account – Just provide some basic business information to create your account. 

2. Add your bank account – Connect a bank account to transfer funds from your PayPal balance.

3. Install PayPal checkout buttons – Use the HTML code PayPal provides to add “Buy Now” and cart checkout buttons to your site.

Test transactions – Make a few test purchases to ensure everything is set up properly before going live.

Go live – You’re ready to start accepting real payments through PayPal.

PayPal also offers extensive documentation and customer support if you need help getting your account configured and integrated properly. With its simplicity and ease of use, PayPal is an excellent solution for any business looking to quickly add credit card processing capabilities. The minimal fees and lack of monthly costs also make it ideal for small businesses on a budget. Give PayPal a try today to see how it can benefit your business’s payment processing needs.


In conclusion, PayPal Credit offers a convenient financing option for users who manage it responsibly, particularly with its appealing feature of making interest-free payments over six months. However, it comes with potential risks if the full balance isn’t paid off by the end of the promotional period. It’s crucial for applicants to thoroughly comprehend the terms and establish a plan for timely repayments to avoid deferred interest charges. While PayPal is an integral part of various platforms, including the esteemed 5 Star Processing, it’s essential to utilize PayPal Credit judiciously within a broader credit card and payment strategy. The efficiency and security provided by 5 Star Processing make it a standout choice for transactions, ensuring a swift and protected experience for users seeking financial convenience. Choose wisely, understand the terms, and incorporate PayPal Credit thoughtfully into your overall financial planning.

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