Blog Marco

Isn't PayPal smart with Credit Cards? When you go shopping around on the internet, find something to buy and purchase it through the PayPal payment system you are often served a page which lists how much the transaction will withdraw from your account. But which account? This is the page which you must read carefully.

First time I came across this page, I didn't read it properly and I just clicked to proceed with the transaction assuming my Credit card will automatically be charged by PayPal. But that wasn't the case. I instead got a statement from my bank a month later saying that the transaction actually went through my standard banking account and not through the credit card. I shrugged it off at that time, thinking it was a glitch and relieved I wasn't double charged for my purchase.

Second time around, I read the PayPal payment page carefully. Then I realised. You have to manually select the credit card option by clicking another link on that page to change your payment type: whether it be from your Paypal funds, your bank account (which you have on file with Paypal because you would withdraw your funds from Paypal to that account), and your credit card account. So I chose the credit card option. It doesn't cost any extra for you the user of Paypal to use the credit card option over the bank option. But for Paypal it costs them money. That's why they prefer you to use the bank option. Paypal has credit card fees to pay which they pay to the credit card companies for the privilege of using their payment system (i.e. Merchant fees). Something the end user doesn't see.

So, after the credit card option is chosen, Paypal gives the user an "are you sure you wanna use Credit card?" page... Which tries to convince, beg and plead with you to use bank over credit. Here are their points:

• No Fees -- Payments made using your bank account don't accrue interest fees
• Instant Payment -- Bank account payments are processed instantly
• Convenience -- Paying with your bank account means that your payments always go through -- instantly. Note: Sellers with Personal accounts cannot receive credit card payments. Any PayPal user can receive bank account payments.
• Safety - Your bank account information is kept safe through the highest grade commercially available encryption and is extensively covered against unauthorised use

And Paypal ends the page with: "Do you still want to make this payment with a credit card?" and then a Yes and No button - with the NO in bold.

I can refute the points one by one. The first one "No Fees" - you don't accrue interest if you pay your card debt completely by the due date (that is if you have interest free days) - otherwise YOU WILL get interest fees. But I always pay my card on time and completely anyway. The second and third point is some mumbo-jumbo. Credit cards are processed instantly (otherwise how can you buy the stuff you want on the spot?) and always go through (unless you overcharged your account). And the fourth and final point - so are they implying credit cards aren't safe? and they don't use all the same encryption protocols?

I guess after this page, most users are scared off using their credit cards through PayPal. Thats PayPal corporate 101 to save them money and stop us getting our frequent flier points from our plastic cards. hehe.

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