PAYPAL customers will be hit with extra surcharges from today and they won’t be happy.
Shoppers using the global payment platform will now (September 1) pay more interest for every £500 borrowed through PayPal Credit.
Paypal customers could be charged more from todayRex
Similar to using a credit card, PayPal Credit offers users the chance to borrow money for their purchases when they checkout online.
Shoppers will be sent a monthly statement which they then must pay back in instalments.
But PayPal credit is not interest-free meaning customers will an extra amount on top of how much they borrowed.
The interest rate that a customer is charged is based on their credit score and PayPal offers three typical rates.
These are currently 21.9%, 25.9% and 29.9%.
However from today (September 1) PayPal is raising the lowest rate of interest charged from 21.9% to 23.9% APR.
It means that for every £500 borrowed, customers will now pay 69p more per month.
So if you’ve borrowed £1,000, you’ll pay £1.39 more per month.
Customers have been warned about the change before it came into place today.
When it was first announced in July, a PayPal spokesperson said: “The change is in response to an increase in the underlying costs of us providing PayPal Credit to our customers.
“We encourage customers to contact us with any questions or concerns the change could impact on their current financial situation.”
Are there alternatives?
Before using PayPal credit, think about your options — and find the cheapest way to borrow.
It’s really important to only borrow money if you’re able to pay it back, otherwise you could end up in a lot of unwanted debt.
If you already have a no-interest credit card or overdraft, then you may want to stick with those rather than Paypal credit.
You’ll also be covered by Section 75 refund protection if you borrow through a credit card.
Another option, which might suit those with low scores, is using a credit union, whose rates are capped at 42.6%.
But remember it’s always vital to ask yourself if you actually need to borrow before committing to a new credit card, personal loan or overdraft.
If you’re struggling to pay debt, there are a number of services you can use to get free advice and help, including:
StepChange – 0800 138 1111National Debtline – 0808 808 4000Citizens Advice – 0808 800 9060
If you do need to borrow but wish to reduce your costs, there are a number of ways to improve your credit score:
Boost your credit score
Getting on the electoral register is a must when it comes to building a decent credit score.
This proves who you are and where you live meaning it’s easier to get credit if you’re on the list.
It is also wise to check the electoral roll for any errors. You can sign up by registering to vote.
Don’t make too many credit applications as it can be seen as a sign of financial distress – and each application will be recorded on your file.
Use a “soft-search” eligibility calculator to show how likely you are to be accepted.
Always pay your bills as late payments are also recorded in your file.
Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.
The best credit card deals – with the lowest rates, biggest limits, cheapest fees and longest interest-free windows – are reserved for those with top-notch credit scores.
Lighten your loans
If you took out a loan a couple of years ago, it may be worth searching for a better deal.
Using a new loan at a lower rate to pay off an old one can sometimes make sense.
But remember, not everyone gets the rates advertised by lenders, as these are reserved for those with good credit ratings.
Check which loans you’re most likely to get without damaging your score by using an eligibility tool such as the one on Compare The Market or MoneySavingExpert.com.
Blitz your credit card balance
Do not let credit card debt linger. If you’re just paying the minimum each month, it could take decades to clear.
Only making the average 2.5% minimum monthly payment on a £5,000 balance means it would take you nearly 38 years to pay back and cost nearly £15,000 in total, on an interest rate of 22%.
Switch to a balance transfer credit card to get a window of up to 34 months with no interest charged.
Break the total debt down into monthly payments and set up a direct debit to ensure you wipe the balance in that time.
If that’s impossible, try to switch again to a new card.
But not everyone can get the top balance transfer deals, as they require an excellent credit score.
Find out which cards you’re most likely to get with the eligibility checkers on Go Compare or Uswitch.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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