PayPal vs Credit Cards, Which Is Safer?

When shopping online, ensuring the security of your transactions is very important. Comparing PayPal and credit cards, both offer similar security features, but which one is safer?

Person thinking about credit card and paypal

Understanding PayPal and its Functionality

PayPal is an online payment platform that allows users to send and receive money, make purchases, and manage transactions. Various online retailers accept PayPal as a payment method due to its convenience and security features.

Users can link their preferred payment method to their PayPal account, such as a credit card, debit card, bank account, or rewards balance. PayPal encrypts your financial information, keeping it safe from potential threats. Additionally, PayPal offers free money transfers to friends and family when using an available balance.

The PayPal app provides online bill pay and investing options, as well as a high-yield savings component. Furthermore, PayPal offers its own credit card, the PayPal Cashback Mastercard®*, which has no annual fee and allows users to earn cashback on purchases.

PayPal Security Features

PayPal encrypts your payment information to protect sensitive financial data. Additional security measures include purchase protection for all PayPal transactions. However, disputes must be filed within 180 days of the purchase, and PayPal accounts must be in good standing.

PayPal purchase protection covers situations such as:

  • Receiving an incorrect item
  • Receiving a used item instead of a new one
  • Item never arriving
  • Receiving a different quantity of items than ordered
  • Receiving a damaged item
  • Receiving an item missing parts
  • Receiving a generic item instead of an authentic one

PayPal’s $0 Liability for Eligible Unauthorized Transactions program covers charges for transactions that you did not make, provided you report the issue within 60 days.

Credit Card Safety Features

Most credit cards have a $0 fraud liability policy, protecting cardholders from unauthorized purchases. The Federal Trade Commission (FTC) states that cardholders are not legally responsible for unauthorized charges if they report a lost card before it is used or if the card number is stolen while the card remains in their possession.

If fraud occurs after reporting a lost or stolen card, the maximum legal liability is limited to $50. The Fair Credit Billing Act (FCBA) provides additional consumer protection for credit card purchases, but disputes must be for amounts of $50 or more and filed within 60 days.

The FCBA covers billing errors such as:

  • Unauthorized charges
  • Incorrect amounts or dates
  • Charges for items never received
  • Items or services not delivered as promised

However, the FCBA does not cover the quality of goods or services delivered by a merchant. Some credit cards offer enhanced security features, such as purchase protection against damage or theft, extended warranties, and return protection.

Comparing PayPal and Credit Cards

Both PayPal and credit cards offer similar security features, with PayPal having a slight advantage due to its built-in purchase protections. Users can earn rewards with credit cards whether they pay directly with a merchant or through PayPal.

The choice between paying with a credit card or PayPal comes down to convenience, as the security features are comparable.

Credit Cards vs. Debit Cards

Debit cards do not offer the same level of protection as credit cards. The FTC outlines that debit card holders may be liable for higher amounts in fraudulent charges, depending on when they report their card lost or stolen. For example:

  • Reporting within two business days of learning about the loss or theft results in up to $50 liability.
  • Reporting between 2-60 calendar days after receiving the statement can lead to a liability of up to $500.
  • Reporting beyond 60 calendar days after receiving the statement may result in full liability for all fraudulent charges and potential losses in linked accounts.

Tips for Secure Online Shopping

To maintain the safety and security of your financial information, consider the following tips for online shopping with PayPal or a credit card.

Best Practices for Using PayPal Safely

  1. Create a strong, unique password for your PayPal account and update it regularly.
  2. Never share your login information and avoid leaving it visible to others.
  3. Avoid making PayPal transactions on public Wi-Fi networks.
  4. Enable multi-factor authentication for added security.
  5. Contact PayPal immediately if you notice an unauthorized transaction.
  6. File disputes promptly using PayPal’s dispute resolution process.

Best Practices for Safely Using Credit Cards

  1. Create a strong, unique password for your online account and update it regularly.
  2. Set up alerts to notify you of credit card transactions.
  3. Avoid making credit card transactions on public Wi-Fi networks.
  4. Keep your account number and details private at all times.
  5. Monitor your credit card account for fraudulent charges.
  6. Report unauthorized transactions to your card issuer immediately.


Both PayPal and credit cards provide similar safety features and fraud protection. Be sure to review your credit card’s purchase protection policies, as they may differ from PayPal’s. It is crucial to remember that credit cards and PayPal are generally safer than debit cards for online shopping. Either payment method offers enhanced security features, and using them may also help you earn rewards or cashback on purchases.

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