Industry guru Dave Taylor offers free tech support on a wide variety of technical and business topics, including HTML, Apple iPhone, online advertising, Cascading Style Sheets, Web design, management, Unix, Linux, search engine optimization, online dating, Mac OS X, shell script programming and Microsoft Windows.

Is a Paypal Debit card better than a Paypal Plus card?

I've been a Paypal member since before it was part of eBay and I only recently learned that they have credit cards available. Cool! My question: what's the main difference between their Paypal Debit Card and Paypal Plus Card?

Dave's Answer:

These are two completely different beasts, actually, and their differences are quite substantial. The Paypal Debit Card looks like a real credit card, it even has a MasterCard logo on it, but it's not a credit card and doesn't give you access to any credit whatsoever. It does, however, give you easy access to your Paypal balance. The Paypal Plus Card, by contrast, is a true credit card and while it lets you purchase items you can't afford, it doesn't let you gain any access to your Paypal account balance.

Let me define a few things, then we'll come back to these two cards.

Credit is basically an ongoing loan that a credit card issuer (usually a bank) grants you. If you're young and at the beginning of your earning and payment history with financial devices, your credit limit can be quite low, perhaps just a few hundred dollars. As you earn more and build a record of reliable payments, your credit limit can shoot through the roof and you could easily go tens or even hundreds of thousands of dollars into debt.

Banks issue credit cards because they want you to be unable to pay off your debt every month. Think about this: If you buy a $1000 item and can only pay $100/month, odds are you'll end up paying closer to $1500 by the time you finish the last payment because of interest charges. Many credit cards have 20% or higher credit rates, which isn't too far from that loan shark down the street in my eyes. :-\

Anyway, it's confusing on the Paypal site because they have these two cards that look so darn similar, but they're really quite different. The credit card that they offer, the Paypal Plus, is what's know in the financial industry as an affinity card, and it's managed by a bank that's unrelated to Paypal corporation. It's just a credit card like the one you can get with a Disney logo on it from Disney, the NASCAR one you can get, the airline credit card you might already have, and so on. In many ways, it's completely detached from anything else on Paypal.

In my opinion, the Paypal Debit Card is far more cool because if you have lots of money flowing in your Paypal account, you already know that it can be a pain to access and use it, and leaving it in The Bank of Paypal might be good for them, but it sure doesn't help you pay the bills. That's why the debit card is so cool: it automatically deducts the cost of any given transaction from your Paypal account.

So if I go into Starbucks and use my Paypal debit card to pay for a chai, say, then there's an immediately transaction against my Paypal account for that cost and it shows up as yet another Paypal transaction, as if I'd stood at the register and clicked on the "Send Money" tab. Here's how it looks, in part:

Notice here that these three transactions are money sent to me, money I sent someone else and, the third entry, a Paypal debit card transaction. All neatly displayed and easy to track and monitor.

That's the scoop on the debit versus credit card. Hope that helps you make an informed decision with your own Paypal account.

While we're talking about Paypal, if you're a merchant, you really owe it to yourself to learn how to get started with a Paypal Merchant Account [aff link] too.

Help others find this article at Del.icio.us, Digg, Netscape, Reddit, and Stumble Upon

Subscribe!

Never miss another useful Q&A article again! Subscribe to AskDaveTaylor with Google Reader.

Comments

Couple other things.

With my Paypal Debit card, I get 1.5% cash back for every transaction I make with the card.

Also - I have the option to link it to my checking account or another backup funding source so that even if my Paypal balance is not sufficient to cover the transaction - it will be covered via a passthrough withdrawl from my backup source. Pretty cool

Posted by: Rosey at December 20, 2006 9:32 AM

I notice that the Paypal Debit card DOES NOT have debit on it like most debit cards. I would guess that this would be a good thing when renting cars, or any transactions that require a credit card...

Posted by: Steven at June 1, 2007 11:40 PM

Is it true there is a small fee involving a transaction with your Paypal Debit Card when you use backup funding source, due to not enough funds inside your Paypal account?

Will you still get your cash back?
or is totally free to purchase without funds and rely always on backup funding.

thanks.
moemi.

Posted by: Moemi at August 15, 2007 12:42 PM

I can't seem to figure out how to apply for the paypal debit card! Please help!! Thanks!

Posted by: Curtis at June 27, 2009 2:48 PM

Good day,

How then do I apply for the Paypal Plus card, am from Niger? will it work in my country?

Thanks.

Charles

Posted by: Charles at July 15, 2009 1:41 AM

I have used my PayPal Debit card for 5 years now and it's one the greatest cards out there. Not only because you get cash back (1%) with every credit transaction you make. But everything comes off your PayPal account balance! And what's even neater is that if you have insufficient funds in the PayPal card it will automatically deduct the remaining balance from your regular checking account if you have it linked as back up funding! It's wonderful! Having the PayPal debit card not saying "debit" on it is also a plus because you could use it to reserve hotels, rent cars, etc. Where as if you were to use to your regular banks' debit card you would not be able to do so or maybe you could if you feel like spitting out $300 just for a car rental deposit (That's in Miami,YIKES!) So, yes, overall I think the PayPal debit card is truly the best! I also invest my PayPal balance through their Money Market Fund so I gain interest on the balance that is kept there. There's no fee for that, as a matter of fact, I've never had a fee for ANY transaction I've had with PayPal, NOT ONE. My only recommendation would be to have it link to your regular checking account in case you ever have insufficient funds. Other than that, enjoy and watch your savings keep growing! Good luck.

Also, something about wiping out your PayPal debit card as you pay and it reads "Premier Business Card" instead. Makes it look pretty important!

Posted by: Marcos at July 16, 2009 9:12 AM

Paypal has just introduced a new way to scam you out of some of your money. Here's a recent email I received from Paypal.

"Many of you asked us to make tracking your PayPal Debit Card cash back simpler. You got it.
Starting August 1, 2009, the cash back earned on your PayPal Debit Card transactions will be combined into a single deposit and paid monthly, rather than after each transaction, making your record keeping easier.
Your cash back rate won’t change."

What this means is that Paypal will now keep your cash back money and not release it till the end of the month. You are in fact making Paypal a interest free loan of your money till the end of the month.

Posted by: Ray Kruger at July 21, 2009 3:48 AM

I love PP. I think this could be a NEW model for "Banks" if only people could get over the present, bad idea of people taking their money and telling them their cool for giving it away ...

Can financial entities like PAYPAL take over? Can we get rid of BANKS??

Posted by: Francezca at August 20, 2009 8:53 AM

Hi Dave please I want some guidance on how to open a verified paypal account that would recieve payments in Niger. Thanks a lot.

Posted by: Dan at August 23, 2009 1:37 PM

One problem I have with Paypal is that once i've made money, I can't take the paypal balance and put it back into my bank account or back into the credit card. I buy and sell and want to take the paypal balance and put it back into my bank account or credit card i used to make purchases. Is that possible? Thanks Dave!

Posted by: Adam at November 17, 2009 3:48 PM

Dan, I can't help you with that one. Talk with Paypal and good luck.

Adam, I don't think that it's possible to transfer money from your Paypal balance back onto a credit card. You can debit your credit card, but you can't credit it (confusing, eh?)

Posted by: Dave Taylor at November 29, 2009 6:34 PM

Yeah, the only real way to pull cash from paypal is to become a business member, and apply and get the Paypal Debit Card. With it, you can go to an ATM and withdraw cash just like any other bank card....thus allowing you to withdraw cash for services paid for and sitting in your paypal account.

Also, the debit card has changed appearance quite a bit. It now DOES say debit on it, in small type no-less.

Good luck!

Posted by: Ben S at January 6, 2010 9:47 PM

I have something to say, now that you mention it, but ...

I do have a lot to say, and questions of my own for that matter, but first I'd like to say thank you for all your efforts on this Web site by buying you a cup of coffee!

I do have a comment, now that you mention it!