Is it Worth It and Can You Apply?

Here on DebtReviews we understand debt and financial difficultly better than most. We have a personal connection because we’ve been in some of the situations that our readers find themselves in. We try to disconnect where we can in order to provide an unbiased viewpoint, but we bring this personal experience to the fore when it is required.

This is one of those occasions. There is no shortage of information out there about PayPal Credit and PayPal Working Capital, but a lot of it is from financial experts who haven’t actually used these services. We have been using PayPal Credit for a number of years now and we were there at the moment PayPal Working Capital launched, so we have plenty of experience with these services and in this review we will give our honest opinion of both.

The Modern PayPal

PayPal Then vs Now

PayPal has not always had the best reputation, and justifiably so. If you go back a decade then the customer support was terrible at best and non-existent at worse. It was not very accessible and besides the ability to make payments online, it was hard to see why it was supposed to be better than the alternative options that consumers had at their disposal.

These days it is a different story. We used to be in that large group of people who hated PayPal. At one point we even vowed never to use the service again. But after several years of abstinence we returned, reluctantly, and we persevered. And we’re glad we did, because we witnessed a huge turnaround and PayPal is now so much better than it used to be.

There are a few features that make the modern PayPal infinitely better than the old PayPal and many other web wallet payment services. Two of these, PayPal Credit and PayPal Working Capital, will be discussed shortly in more detail. As for everything else, here is a brief rundown:

PayPal Now vs Then

  • Clarification: PayPal were trigger happy with suspensions in the old days and members fell foul of their terms without realizing they had done wrong. These days they are much clearer about what they allow and what they don’t allow and they are also more lenient and forgiving. One example is that you can open as many business accounts you want (providing they use the name, address and bank account of a business that is not yet registered) and still have a personal account, something that drew a lot of concern (and suspensions) in the early days.
  • Support: In the bad old days it was difficult to get through to an actual human and when you did, they were not helpful. These days it’s the quickest and easiest support program we have encountered. Just login, click “Help” and you will be given a unique passcode and a phone number. Dial the number, input the passcode when prompted and it will connect you with an advisor who knows your account details based purely on that number.
  • Layout: The layout of the old PayPal was dated and difficult to navigate. When it changed there was an influx of complaints, as is often the case, but as is also often the case, these faded away when customers realized that the new layout really was much better.
  • Fees: PayPal still charge fees, but they tend to be less than their rivals, including Skrill, a company founded (as MoneyBookers) as a cheaper alternative to PayPal.

Review of PayPal Credit

PayPal Credit Review

PayPal Credit is a line of credit attached to your PayPal account. It is available on both personal and business accounts and it will offer you an amount based on your PayPal activity. The older and more trusted the account, the more you will be offered. There are no credit checks and the credit doesn’t affect your credit score, but it does come with a high APR, one that increases based on your circumstances.

What we Like About PayPal Credit

PayPal Credit is easy and if you’re going to pay back the money you borrow within 4 months then it’s also free. We like to use this service to cover Christmas and other expensive holidays when the belts tighten a little. But we don’t use it like a credit card and we wouldn’t recommend it either.

What we Don’t Like About PayPal Credit

PayPal Credit will charge you a late fee if you miss a payment, which is understandable, but on several occasions we have experienced system errors and failed payments that have resulted in these late fees been charged. We also had issues setting up regular payments, and for some reason PayPal Credit doesn’t let you use your PayPal balance to make repayments if the amount is in another currency.

These issues are fiddly and annoying, but they likely won’t affect many users. However, the high interest rates will. It is convenient and you can take advantage of interest free periods, but make sure you pay the debt back in that period or it may come back to bite you.

Also, in one instance there was an issue with our primary payment source which caused a few subscription payments to fail. PayPal then reverted to our PayPal balance, and when it realized there was no money in there, it took the money straight from PayPal Credit. Sure, we can pay it back, but we would prefer this service if there was a disconnect between it and our regular PayPal account and if all payments were fully authorized in advance.

What is PayPal Working Capital?

PayPal Credit

PayPal Working Capital is available to PayPal business account holders. It offers a lump-sum amount, paid into your PayPal account, that you pay back by giving PayPal a percentage of all future income until the debt is cleared. There are no credit checks and there is no interest, you simply choose how fast you want to pay them back (10% to 30% of future income) and then pay a small fee on top of this.

The amount you are offered will depend on how much money is paid into your PayPal account and the only stipulation is that you must pay back at least 10% of the debt every 90 days.

As an example, if you borrow $1,000 then you may be asked to pay back around $1,050 in total (the actual amount will depend on your income and the chosen percentage amount, but it’s also very low). If you choose to pay back in 10% repayments, then they will take 10% from each incoming payment your business account receives until the debt is cleared. If you have a slow few months and don’t earn anything, you will need to pay $105 directly, which will still go towards clearing the debt. In total, you will have 3 years to clear this debt and will need to earn just over $10,000 in that time in order to clear it organically.

Is PayPal Working Capital Available Everywhere?

The PayPal Working Capital service was launched in the final quarter of 2013 in the United States, before being rolled out to Australia and the United Kingdom in the years that followed. As far as we can tell, it is only available in these countries.

What we Like About PayPal Working Capital

We personally love PayPal Working Capital ad can’t find many faults with it. It has never done us wrong and we regularly dip into it. We see it as a payday loan that won’t screw you with high interest, and even like a payday loan for bad credit, providing that your PayPal account is earning money.

This is one of those things that seem too good to be true, but it would be naive to suggest that PayPal Working Capital is somehow a gift for businesses everywhere. If you have a PayPal business account then you’re constantly generating income for PayPal. Every time you pay or receive it means additional revenue for their coffers. By offering you a loan like this they are basically giving you what you need to grow your business so that they can earn more money from that business, and they are also earning a small additional income from the fee you pay.

What we Don’t Like About PayPal Working Capital

There aren’t really any major negatives to report, but there are a few things we feel it necessary to cover as these are missed by many users:

  1. There are no credit checks, but if you miss your payments and default, they will chase you down.
  2. PayPal will still take their usual amount from each incoming payment. Therefore, you may lose up to an extra 5%, and more if a currency conversion was required.
  3. If you give someone a refund, you will not get the Working Capital repayment back. If there is not enough money in your PayPal account to cover the refund (because Working Capital took its share) it will dip into your primary payment source to make up the difference.