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PayPal vs. credit cards: Which is safer to use online?

Both payment methods offer security features and purchase protection.

Online fraud has made many people think twice about how to pay when online shopping. Both PayPal and credit cards offer features and services that help protect you, including fraud-monitoring systems and ways to get your money back if a purchase isn’t delivered as promised.

There are many similarities and some differences between using PayPal or a credit card so choosing between them comes down to your own preferences. Let’s take a look at how each option works so you can decide which one is better for you.

PayPal vs. credit card security features

Here’s a quick guide to the different types of protection you’ll get when you use PayPal or a credit card. We’ve focused on the key options most credit cards offer as features can vary depending on which card you’re using.

Security featurePayPalCredit cards
Fraud monitoringYes.Yes.
24/7 customer serviceYes. PayPal’s customer service hours are 6:00 a.m. PT to 6:00 p.m. PT Monday through Sunday.Yes. American Express, Mastercard and Visa credit cards all offer 24/7 emergency hotlines for lost or stolen cards as well as for suspected fraud.
Two-factor authenticationYes. You can choose to have a one-time PIN sent to your mobile phone by turning on PayPal Security Key in your account’s security settings.Yes. If you have a card that offers Mastercard SecureCode, Verified by Visa and American Express SafeKey and shop with participating brands, you’ll be prompted to authorize the transaction with a PIN or other security step.
Reimbursement or chargebackYes. If an item doesn’t get delivered or if it arrives and is significantly different from the seller’s description, PayPal offers reimbursement for the cost of the item and the original shipping costs.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 technologyYes. PayPal offers encryption for all the financial details you have stored in your account.No. While credit cards offer encryption for purchases you make in-store, most of them rely on the encryption used by online stores when you make payments over the Internet.

Which option is more secure?

PayPal offers slightly better encryption, which on some websites could provide you with slightly better protection. However, both credit cards and PayPal offer a number of security features and benefits for when you’re shopping online.

woman's hand with red nails holding a white credit card on top of a laptop

Using a credit card for online shopping

Just about any online store will give you the option to pay with a card. With this method, you’ll provide the following details:

  • Your name, usually as it appears on the card
  • The card number
  • The expiration date
  • The Card Verification Value, known as the CVV or CVC or security code

Similar to in-store purchases, card acceptance may vary depending on whether you’re using an American Express, Mastercard or Visa credit card.

Pros

  • 24/7 fraud monitoring. Most credit cards have security systems that detect and flag suspicious activity as it happens. Depending on the card, you will also have the ability to lock or freeze your card if you suspect it’s been used for fraud.
  • Zero-liability policies. This feature covers the cost of any fraudulent transactions made on your account so you’re not left out of pocket if your card is compromised.
  • Protect your actual money. If your purchases don’t show up or are different from the item descriptions, your credit card provider may be able to help you get your money back.
  • Fee-free options. Some cards offer 0% foreign transaction fees when you make purchases with a business based overseas, potentially saving you 1% to 3% per online purchase.
  • Rewards. If you have a rewards credit card, you’ll be able to earn points for your purchases and redeem them later on.

Cons

  • Online fraud risks. Online credit card fraud has been steadily increasing as more people use cards to make purchases via the web.
  • Entering card details. You may have to type your card’s details each time you make a purchase. As annoying as this can be, this could also increase the risk of fraud if your internet connection isn’t secure or if you’re in a public place. As a general rule, never enter your credit card details on a website that starts with http://. It should always begin with https://.
  • 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 you’re using a card that does charge foreign transaction fees, it may not always be clear when this fee will be charged. For example, if an online store is based overseas, this fee may apply even if the purchase is shown in Canadian dollars.

Using PayPal for online shopping

Unlike a credit card, PayPal lets you store your chosen payment details in a secure account. You can then make payments through your PayPal account when you shop with a store that accepts it.

Pros

  • Payment encryption. Every payment made through PayPal is encrypted so that your details are kept safe. This reduces the risk of personal or payment information being stored in places where 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. Instead, you’ll just be prompted to log in to your account and select your preferred payment option.
  • Refund options. PayPal offers reimbursement for items and their original shipping costs when they are not delivered at all or when they are delivered in very different form from the seller’s description.
  • Credit card rewards. If you add a rewards credit card to your PayPal account, you’ll be able to earn points on eligible purchases. What’s more, most major credit cards are accepted by PayPal.

Cons

  • Currency conversion costs. If you shop with retailers that don’t accept foreign currencies, PayPal will use its own conversion rates for the transaction. This often comes with additional fees. PayPal will show you the conversion rate at the time of the transaction.
  • Confusing payment details. A transaction that’s processed by PayPal could show its billing details, instead of the details of the company you made your purchase with. If you’re not aware of this, you could mistake the payment for fraud when checking your credit card or bank account transaction history.
  • Acceptance. Not all online stores accept PayPal, so using it will often depend on the business you’re shopping with.

Compare credit cards

Name Product Welcome Offer Rewards Purchase Interest Rate Annual Fee Min. Credit Score Description
RBC ION Visa
3,500 points
1.5 points per $1 spent
20.99%
$0
Min. recommended credit score: 660
Get 3,500 Avion points when you get approved for the card.
Neo Credit Mastercard
Get $25.00 + up to 15% cash back
Up to 5% cash back
19.99% - 29.99%
$0
Min. recommended credit score: 600
Get $25 when you sign up for the Neo Financial Mastercard. Plus, earn bonuses like 15% cashback on your first purchase at most partners, and earn an average of 5% cashback at partner stores and at least 1% cashback guaranteed.
Tangerine World Mastercard
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 600
Earn 10% cash back (up to $100) when you spend $1,000 in the first 2 months. Valid until October 31, 2024. Plus, get a 1.95% interest rate on balance transfers for the first 6 months.
American Express Cobalt Card
15,000 points
Up to 5x points per $1 spent
21.99%
$155.88
Min. recommended credit score: 700
Earn up to 15,000 Membership Rewards points in your first year. Earn 1,250 Membership Rewards points for each monthly billing period in which you spend $750 in purchases. That’s up to $150 towards a weekend getaway or concert tickets.
BMO CashBack Mastercard
5% cash back
Up to 3% cash back
20.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,500). Plus, get a rate of 0.99% on balance transfers for 9 months. A 2% fee applies to transferred balances.
Tangerine Money-Back Credit Card
10% cash back
Up to 2% cash back
19.95%
$0
Min. recommended credit score: 600
Earn 10% cash back (up to $100) when you spend $1,000 in the first 2 months. Valid until October 31, 2024. Plus, get a 1.95% interest rate on balance transfers for the first 6 months.
RBC Cash Back Mastercard
N/A
Up to 2% cash back
20.99%
$0
Min. recommended credit score: 650
RBC ION+ Visa
7,000 points
3 points per $1 spent
20.99%
$48
Min. recommended credit score: 660
Get up to 7,000 welcome points. Get 3,500 points on approval and earn 3,500 bonus points when you spend $500 in your first 3 months.
BMO eclipse rise Visa Card
25,000
Up to 5 points per $2 spent
20.99%
$0
Min. recommended credit score: 660
Earn up to 25,000 bonus points.
RBC Avion Visa Infinite
35,000 points
Up to 1 point per $1 spent
20.99%
$120
Min. recommended credit score: 650
Get 35,000 Welcome Points upon approval.
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Bottom line

PayPal generally does have better encryption when shopping online, but not all retailers accept it as a payment method. If you shop online often, there isn’t much difference between choosing to pay with your credit card or your PayPal account as credit cards offer nearly the same security features as PayPal. You can also setup your credit card as the payment option for your PayPal account.

Compare credit cards here to make the most of your online shopping.

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