Paying with PayPal vs. Paying with a Credit Card

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In our new digital era that we live in, mobile payments are ever more ubiquitous.  With Square, Venmo, and PayPal practically taking over the traditional cash payment market, it’s difficult to avoid nowadays.  But, frequently, I run into the problem of deciding whether to pay for goods that I buy online with my PayPal balance or a credit card.  What’s the best system to use?  Let’s explore below!


Things To Understand

The way things work in the business world of things (sorry to bore you, I am a business student after all) is how a merchant is charged by you paying for your item.  The merchant, if you use a credit card, is charged an ‘interchange fee’ which usually is around 3% of your purchase.  However, if you use PayPal, the merchant is charged the same, but unless you are using your PayPal balance, you are charged a fee for using a credit card through PayPal.  It’s not advisable to use PayPal in the situation.

In terms of security, both systems are very safe.  Of course, there are more and more ‘hacks’ happening in cyberspace these days, and it’s best to assume that nothing you do is truly, 100% safe, but both credit cards and PayPal offer encryption to protect you pretty solidly against attack.


Why I Would Never Recommend Using PayPal

PayPal is a really convenient system to pay friends and family for things you owe them.  However, the fee that PayPal charges you for using a credit card for such a transaction would negate any value the points you earned would have.  The only time I would recommend using PayPal is if it is a balance-funded transaction.  It’s not the most ideal of situations, but sometimes you must do what you must do!

You should never use PayPal for a credit-card enabled transaction in my opinion.  If it is free for you to earn points, you should do just that!  Earning points is the most glorious thing you can do when spending money, in my opinion (though that opinion is, admittedly, extremely biased).  If the transaction is free for you to transact, meaning, you are not charged any fees by the merchant or credit card company for buying the item, I recommend it.

Also, one caveat- I have used my credit card for an online store in years past that was considered a ‘foreign transaction’ by the credit card company, and was charged a 3% foreign transaction fee.  Know your credit card, and discover whether or not you are charged foreign transaction fees.  Any purchase made in foreign currency will be considered a foreign transaction, by the way.


That’s a quick primer on PayPal vs. credit card transactions.  You may see this decision occurring in your life more and more as the months roll on.  So, be prepared to make the right decision (always take the points) and know if you’ll be charged a fee by the merchant or your credit card company.  Did I miss anything?  Tell me in the comments below!

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