Does PayPal Offer the Same Consumer Protections as a Credit Card?

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What’s the best method of payment? Well, if you’re money expert Clark Howard, it’s usually a credit card.

In addition to consumer protections, most of the best credit cards offer sweet rewards programs, often in the form of 2% cash back (or more for specialty cards and promoted spending categories).

Allowing a company or individual to lift funds straight from your bank account via a debit card or automatic payment isn’t Clark’s idea of fun. And he’s not a fan of certain payment apps or “Pay in 4.”

But what about PayPal? What types of protections does it provide to you as a consumer?

Does PayPal Offer Consumer Protections Like a Credit Card?

Does PayPal offer consumer protections like credit cards do?

That’s what a Clark listener recently asked.

Asked Sona in Colorado: “For online purchases, I often use PayPal and they charge my credit card. Do I have the same protections through PayPal that I usually do with a credit card?”

Credit cards allow you to dispute fraudulent charges. It’s one of the reasons Clark never wants you to pay for things with a debit card. Some credit cards offer purchase protection or some type of insurance for rental cars and cell phones, for example.

So what about PayPal?

“PayPal interestingly enough has very clear standards for protecting you with purchases,” Clark says. “Even though as best I can tell they are not required in many cases to have the same protections you would have with a major credit card.

“It’s a big question mark if you pay with a credit card through PayPal if you have the credit card protections you normally would have. And PayPal shortcircuited having to figure that out with your individual bank or credit union by giving you the ability to dispute on PayPal.”

PayPal Consumer Protections Step 1: Open a Dispute

According to PayPal’s website, it offers a two-pronged system for charges gone wrong.

First, you can open what PayPal calls “a dispute” with a merchant.


“The goal of the dispute process is to address issues before they escalate into a claim,” PayPal says.

Inside of PayPal, that’s sort of a self-governing arbitration. It allows the merchant and customer to come to an agreement. Perhaps the promised goods or services never got delivered — or at least not in the way the customer expected. The most common disputes include INR (Item Not Received) and SNAD (Significantly Not As Described).

When you open a dispute as a buyer, PayPal puts “a hold on that transaction’s funds until things are resolved.” Again, it hopes that the buyer and seller can connect and resolve the dispute.

PayPal Consumer Protections Step 2: Create a Claim

PayPal typically requires 20 days from when a customer opens a dispute until it allows the customer to reach the second part of its system: a “claim.” (A buyer can also initiate a claim if they allege their account was hacked or compromised and someone made an unauthorized purchase.)

During the claims process, “both the buyer and seller are typically asked to provide additional information before a decision from the payment processor can be reached.” In other words, for claims, PayPal conducts an internal trial by evidence.

If a business gets a lot of claims, “the higher the likelihood that your account could be reviewed, your balances could be affected, and reserves or limitations could be put in place.”

Final Thoughts

PayPal doesn’t offer the same protections as a credit card. But it does offer more protection than some other payment apps (see: Zelle).

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