Which Is Safer: PayPal or a Credit Card?

PayPal prioritizes enabling safe transactions to allow users to send and receive money electronically. Compared to a credit card, PayPal can be considered just as safe. Learn about the differences and similarities between the safety of PayPal versus a credit card as well as how to take precautions to reduce risk.

Key Takeaways

  • PayPal and credit cards enable safe transactions between buyers and sellers.
  • PayPal uses end-to-end encryption to prevent hacking.
  • You can enable a second authorization feature called the SecurityKey feature with PayPal for additional verification.
  • By law, you're not responsible for fraudulent purchases on a credit card beyond a maximum of $50.
PayPal vs. Credit Card

Investopedia / Amelia Manley

PayPal Products

PayPal has a number of products that enable its customers to send or receive money securely:

  • The PayPal mobile app, which enables contactless payments at real-world retailers.
  • The Venmo mobile app, which is primarily used for person-to-person money transfers and routine day-to-day transactions but also serves as a social app.
  • Xoom, a person-to-person payment app that is used to make electronic money transfers globally.
  • The PayPal Debit Card, a MasterCard debit card for use online or in-store.
  • A PayPal credit card, where PayPal offers two cards issued by Synchrony Bank. It also offers a line of credit via Synchrony.
  • PayPal is in the cryptocurrency arena, allowing its users to buy, hold, sell and check out with cryptocurrencies.

How Safe Is PayPal?

All PayPal transaction data are sent with end-to-end encryption designed to thwart any hacker seeking to capture private information as it moves from buyer to seller. This means your financial information isn't revealed even to the recipient.

PayPal app users can employ a second authorization factor to make each transaction safer. After enabling the SecurityKey feature, you'll get a temporary security code by text message that you enter in addition to your password.

PayPal lays out five recommendations for businesses accepting payment through PayPal to prevent fraud:

  1. Keep track of transactions and reconcile accounts regularly
  2. Set purchase amount limits
  3. Verify billing addresses using the address verification system
  4. Require users to set strong passwords
  5. Ensure the operating system and business software are up to date

PayPal's Security Measures

PayPal has other policies that are designed to address fraudulent activities:

  • The PayPal Purchase Protection policy ensures that users are reimbursed in full, including shipping costs, if a product purchased online using PayPal arrives and is "significantly different from its description."
  • If an order paid using PayPal doesn't arrive, you can report it and get a refund.
  • If an unauthorized purchase is made on your account, you're not liable for it if it is reported within 60 days.

How Safe Are Credit Cards?

Credit card companies also use security features to reduce hacking and financial fraud and credit cards are generally considered safe to use. However, like with PayPal, credit cards are not entirely immune to scams and fraud.

The Basics of Credit Card Fraud

In consumer credit fraud, there are two broad categories: "card present" and "card not present." With card present fraud, a physical card is stolen and used by another person. With card not present fraud, the financial information was stolen and used without the thief having the physical card.

Credit card companies aim to prevent both types of fraud. That's because your liability is limited to $50 under U.S. law, regardless of how much is charged. That said, there are other big downsides for the customer in credit card security breaches, including some serious inconvenience and possible credit rating damage.

Credit Card Security Measures

Most credit card companies have invested heavily in leading security technology to match those adopted by PayPal and other industry leaders. Not every credit card company is the same though, with some more advanced than others.

The biggest change in "card present" anti-fraud technology is the switchover to a card that uses a chip that is inserted into a reader to make a transaction rather than a magnetic strip that is swiped along the side of the reader. The microchip in the card sends encrypted data, making the information harder to steal.

This improved technology, called EMV, has made it safer to use a credit card in a store by preventing the theft of your information as it is transmitted to complete the transaction. This leaves some responsibility for the user to take their own security precautions, particularly when making online purchases.

PayPal and Credit Card Security Breaches

Breaches of credit card data and with PayPal data can occur. Some of the biggest breaches in recent years include those at Capital One, TJX Companies, and The Home Depot.

In many of these cases, the problem was caused by malware targeted at point-of-sale devices. That is, the retailer likely stored credit card information in a way that made it vulnerable to theft by hackers.

Is PayPal Safe for Sellers?

The PayPal transaction process does not transmit information about the bank account or card numbers on either the seller's or the buyer's side. Its encryption method is designed to protect the information from hackers. PayPal also has a seller protection policy that reimburses any losses attributable to its services.

Tips for Protecting Yourself

When it comes right down to it, much of the responsibility for account security needs to be taken by the user, not the issuer. And that's true whether the company is PayPal or American Express, and whether it's a virtual account or a plastic card.

When Using a Credit Card

A few tips for protecting yourself when using plastic credit cards:

  • Cut up any card you still have that doesn't have a chip in it. If you come across a reader that requires you to swipe the card, because the chip reader is malfunctioning or the store has an out-of-date-machine, avoid using it.
  • Use only bank-owned ATMs to get cash.
  • Pay for gas inside the station, not at the pump. Gas pumps are notoriously easy to outfit with a card skimmer that steals account information as it is used.

When Using PayPal or a Credit Card Online

  • Make online purchases only on secure sites. These usually have a url that starts with "https" (rather than "http") and display a symbol of a lock. These are signals that the connection between your web browser and the site's server is encrypted. This is by no means guaranteed protection but it closes off one avenue for fraud.
  • Don't use the public Wi-Fi available at coffee shops and airports. Use a virtual private network (VPN) instead.
  • Don't store your credit card information online at your favorite retailers. Type it in every time.
  • Beware of phishing attacks. These usually arrive via an email or text message promising you something great, if you only click this link.
  • Change the passwords on your credit card accounts (and your PayPal account) frequently, and don't use your name, your kids' birth dates, or any other too-obvious password.

Is It Safer to Use PayPal or a Credit Card?

Both credit cards and PayPal have security features to reduce fraud and provide a way to make transactions that are considered safe.

Is PayPal Safe to Link to a Bank Account?

It is considered safe to link PayPal to a bank account. To use PayPal, you have to link to a bank account or credit card, or deposit money directly to PayPal. The transactions are made using encrypted data, meaning that your private account information is not revealed, even to the recipient of the money.

Can You Get Scammed With PayPal?

There are plenty of scam artists online who will accept PayPal or any other form of payment and deliver nothing in return, or nothing that resembles what you paid for. In that case, the PayPal protection program promises to fully reimburse your loss.

Is PayPal Safe for Debit Cards?

PayPal is considered safe to use with debit cards. When you pay using the debit card option, the information is transmitted only in encrypted form.

The Bottom Line

PayPal, a credit card, or a PayPal credit card can be used online and offline for routine transactions between buyers and sellers. When choosing which to use, consider convenience, the special features that come with the account, and the interest rates charged by the institution.

Whichever you use, you can take steps to improve its safety. Use tough passwords and change them occasionally. Choose the online retailers you use wisely. Avoid public Wi-Fi, and monitor your account for unusual purchases.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
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  7. PayPal. "Curious About Crypto?"

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  14. Paypal. "Sophisticated Security for Sellers."

  15. Cenex. "How To Outsmart Card Skimmers at the Pump."

  16. PayPal. "How PayPal Works."

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The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.