Should I Pay With PayPal or With My Credit Card?

The protections, fees and even rewards are similar, so the choice comes down to convenience.

Kimberly PalmerJuly 1, 2020
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Paying with a credit card or PayPal generates similar fees and protections, and can even earn similar rewards. The best choice for you ultimately depends on which option is more convenient, since the other differences can be negligible.

Here’s how the two payment methods stack up against each other.

Costs and fees

When you use your credit card to buy something in the U.S., you generally don’t get hit with extra fees. It’s the merchant that pays the interchange fee, which is typically 1% to 3% of the purchase price plus a flat fee.

When you make a purchase with PayPal, it’s also free (as long as it’s within the U.S.), and similarly, the merchant pays a fee, which is 2.9% plus 30 cents per sale.

Rewards

When you make purchases directly with a rewards credit card, you'll earn points, miles or cash back on the transaction. For example, a good flat-rate cash-back card earns 1.5% to 2% back on every purchase.

When you pay via PayPal, you can earn rewards at your card's normal rate, too, as long as that card is linked to your PayPal account and you select that option when you pay. It's still free to make purchases this way.

Nerd tip: PayPal offers two co-branded credit cards with Synchrony Bank: the PayPal Cashback Mastercard® and the PayPal Extras Mastercard®. To get either card, you must have a PayPal account, but both will earn rewards on PayPal and other purchases. If you already have one of these cards, you cannot get the other.

Security and liability

If you're a victim of credit card fraud and you report it within 60 days, federal law limits your liability. Most credit card issuers go even further and offer full liability protection. When an unauthorized charge shows up on your account, file an official report. Once the investigation is complete, the fraudulent transactions will be refunded to your account.

PayPal also offers fraud and purchase protection. If you were charged for something you didn’t purchase, PayPal says you'll be covered as long as you report the problem within 60 days. Similarly, if your order never arrives, or what you ordered is different from what arrives, PayPal says you can be reimbursed for the full purchase price, along with any shipping charges. Terms apply.

Rights in disputes

Under the Fair Credit Billing Act, credit cardholders are protected by a dispute settlement process that allows them to challenge billing errors within 60 days of receiving the statement with the error. The card issuer can issue a chargeback, or refund to the consumer, while it investigates. The cardholder keeps the money if the issuer concludes that the cardholder was in the right.

Aside from any coverage PayPal may have under the Fair Credit Billing Act for any of its credit cards or plans, PayPal offers some voluntary benefits for its transactions through its purchase protection program. There are, however, some exclusions, including for in-person purchases and custom-made goods. Voluntary benefits offered by companies can be helpful to consumers, but they are not enforceable as federal protections.

Still, for most transactions, consumers experience similar protections when paying with either method.

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