You can make fast, secure payments with both PayPal and a credit card – and many retailers let you use either one. So how do you decide between them? The best option is to just choose the one you prefer.
If you don't have a preference or aren't sure whether PayPal or a credit card is better for you, let's take a look at the features of each.
Is it better to use PayPal or a credit card?
Here’s a quick guide to the different types of protection you’ll get when you use PayPal or a credit card. As features can vary depending on the credit card you’re using, we’ve focused on the key options most Australian cards offer.
Security feature
PayPal
Credit cards
Fraud monitoring
Yes.
Yes.
24/7 customer service
No. PayPal’s customer service hours are 8am to 8pm (AEST) Monday to Friday and 8am to 7pm Saturday and Sunday.
Yes. You can choose to have a one-time PIN sent to your mobile phone by turning on PayPal Security Key.
Yes. With Mastercard SecureCode, Visa Secure or American Express SafeKey, you can authorise the transaction with a PIN or other security step.
Reimbursement or chargeback
Yes. You can be reimbursed up to $20,000 if your purchases are not delivered or are significantly different to the seller’s description.
Yes. If your purchases are not delivered or are not as they were described, you may be able to reverse the transaction by requesting a chargeback.
Encryption technology
Yes. PayPal offers encryption for all financial details stored in your account.
No. While credit cards offer encryption for in-store purchases, most rely on encryption used by online stores for payments over the internet.
Pre-set transaction limits
No.
Yes. Some cards allow you to set a customised limit for different types of transactions, such as those made online.
Return shipping costs
Yes. PayPal offers to refund the cost of return shipping for eligible purchases, up to $45 per return, 8 times per year.
No.
Should I use a credit card for online shopping?
Using a credit card is an incredibly popular payment method for a lot of Australians. In fact, there are more than 13 million credit cards in circulation in Australia. Just about any online store you visit will give you the option of paying by card. With this method, you’ll need to provide the following details:
The CVV helps protect your account from fraud when you use the card for online purchases – or for other card-not-present transactions, such as those made over the phone.
Similar to in-store purchases, card acceptance may vary depending on whether you’re using an American Express, Mastercard or Visa credit card. Depending on the card and your provider, you could also get an added layer of security through text alert systems or services like Visa Secure, which adds another form of authorisation to payments before they are approved.
Pros and cons of using a credit card
Pros
24/7 fraud monitoring. Most Australian credit cards have security systems that detect and flag suspicious activity as it happens. Your card can be locked or cancelled if fraudulent activity is suspected.
Zero-liability policies. Also known as a fraud protection guarantee, this feature covers the cost of any fraudulent transactions made on your account.
Protect your actual money. Credit card providers will reimburse your money when things go wrong and protect your money if your account is compromised.
Fee-free options. Some cards offer 0% foreign transaction fees when you make purchases with an overseas business, potentially saving you 2-3% per online purchase.
Online fraud risks. Most credit card fraud in Australia happens online. Data from the Australian Payments Network shows card-not-present (CNP) fraud made up 91% of all card fraud in the year to 30 June 2022.
Entering card details. You may have to type your card’s details each time you make a purchase, which could increase the risk of fraud if your internet connection isn’t secure or if you’re in a public place.
Potential interest charges. If you carry a balance from your online shopping, you’ll be charged interest at the card’s purchase rate.
Unexpected fees. If an online store is based overseas, you may be charged foreign transaction fees even if the purchase is shown in Australian dollars.
Unlike a credit card, PayPal lets you store your chosen payment details in a secure account. You can then make payments through PayPal when you shop with a store that accepts it.
When you choose this option at the online checkout, you’ll need to log in to PayPal and choose the account you want to make a payment from. PayPal will then process the transaction through an encrypted network.
This set-up means you can store your credit card, debit card or even your bank account details in a PayPal account, and then choose which of these options you use when paying through PayPal. As a result, you don’t have to enter your payment details every time you make a purchase.
Pros and cons of using PayPal
Pros
Payment encryption. Every payment made through PayPal is encrypted so that your details are kept safe, reducing the risk of personal or payment information being stored in places you don’t want it.
Fast payments. You don’t need to enter your card or account details when you make a payment through PayPal. You can also set up PayPal One Touch, allowing you to make payments without entering your PayPal login details on an authorised device.
Refund options. PayPal offers reimbursement for return shipping costs (up to $45, 8 times per year) as well as for items that aren't delivered or items that differ from the retailer's description.
Credit card rewards. If you add a rewards credit card to your PayPal account, you’ll be able to earn points per $1 spent on eligible purchases.
Cons
Fraud target. PayPal is a well-known online company and has previously been targeted by hackers. While it does regular security updates, there is still some risk involved in storing your card or account details anywhere online.
Currency conversion costs. If you shop with retailers that don’t accept foreign currencies, PayPal will use its own conversion rates for the transaction, which can be significantly higher than rates applied by most cards.
Confusing payment details. Transactions could show PayPal's billing details rather than the retailer's details. Check each transaction to be sure you made those payments.
Acceptance. Not all online stores accept PayPal, so using it will often depend on the business you’re shopping with.
Both credit cards and PayPal offer a number of security features and benefits when you’re shopping online – as well as potential costs and pitfalls. So, if you’re shopping with an online store that accepts credit cards and PayPal payments, choosing between them really comes down to which of the above features and services you prefer.
Compare credit cards with fraud protection guarantees
Every Visa, Mastercard and American Express card has a fraud protection guarantee. If we listed them all, you'd be looking at about 270 cards here. So we've taken our best credit cards and listed them here to help you narrow down your options.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Amy Bradney-George was the senior writer for credit cards at Finder, and editorial lead for Finder Green. She has over 16 years of editorial experience and has been featured in publications including ABC News, Money Magazine and The Sydney Morning Herald.
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