Response to Klarna: PayPal is temporarily completely canceling interest on installment payments

Limited action: PayPal temporarily offers free installment payments

The popular payment service provider PayPal wants to at least temporarily catch up with its competitor Klarna in the installment payment business: Since May 16, 2022, the company has completely waived the charging of interest for temporary payment plans. Unlike Klarna, where interest-free installment payments are part of the offer, this is just a limited special offer that will only last until June 26, 2022. Until then, however, no interest will accrue on any of the payment terms offered by PayPal, namely three, six, twelve or 24 months.

Customers who finance a purchase with PayPal’s installment model during the promotion period only pay the regular price that the product would cost in a one-time payment without having to put up with higher costs incurred due to the delayed payment of the purchase price. As Giga explains, PayPal’s move comes at a very opportune time. Due to the currently very high inflation, many products have increased in price by a substantial amount within just a few weeks. This makes delaying purchasing decisions less attractive and making installment payments a very cheap option for many consumers.

As a customer, you should bear this in mind

However, the interest-free installment payment will not be completely unrestricted. For example, PayPal reserves the right to make the granting of installment payments at zero cost dependent on the creditworthiness of the customer concerned. Apart from that, the possibility of financing a purchase by means of interest-free installment payments only ranges between EUR 99 and EUR 5,000.

In addition, as already mentioned, this is not a complete cancellation of interest on installment payments, but only a time-limited promotion. However, until June 26th, any purchase with PayPal that selects the Installment option will automatically receive zero interest. It is irrelevant how long the installment payments are agreed for – as long as the contract is concluded within the campaign period, no interest will accrue on any of the installments to be paid, not even on those paid after the campaign has ended.

For whom is the campaign worthwhile?

According to PC-Welt, PayPal’s temporary zero-interest campaign is particularly worthwhile for customers who are currently interested in larger purchases. The currently above-average rate of inflation, which according to the Federal Statistical Office rose by 7.4 percent in April 2022 compared to the same month last year, means that many products will become significantly more expensive within a short period of time. A 0% financing like the one currently offered by PayPal is therefore interesting for all those who want to make larger orders and do not want to delay them and risk that the respective products will suddenly become noticeably more expensive in a few weeks are.

Thomas Weschle / Editor finanzen.net

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