Yes, there are several downsides to using PayPal Pay in 3, primarily regarding credit score impact, rigid repayment schedules, and potential account restrictions. While it is generally interest-free, missed payments can incur fees and, critically, are reported to credit agencies, which may hurt your credit file.
Although it does not impact your credit score, this data will be visible to other companies and may impact your ability to obtain credit from other lenders and the cost of accessing it. More information is available in our Pay in 3 Terms & Conditions.
Downsides of Pay in 3 Services
Missed payment risk: Late payments can lead to fees or account restrictions. Not always available: Some orders may not be eligible depending on value or credit checks. Short-term use only: These services are ideal for short-term flexibility, not long-term borrowing.
How pay in 3 payments work – NEXT Help Centre. If you don't make the minimum payment in full or on time your account will be in arrears, which can affect your credit score.
No. Applying for Pay in 4 will not impact your credit score.
PayPal Pay in 4 lets you split up a purchase over six weeks with no interest, while PayPal Pay Monthly comes with terms up to two years and charges interest. There are no fees for either plan. “PayPal's big drawback is that it doesn't have the same flexibility as other BNPL apps.
No. Applying for Pay in 3 will not impact your credit score. A “soft” credit check may be needed, but it will not affect your credit score. However, if you are approved and use Pay in 3 for your purchase, we do share some data on your repayment history with TransUnion.
The decision process is automated. PayPal assess your financial position using a combination of the information you provided in your application and information about your usage and history with PayPal to decide if PayPal Pay in 3 is suitable for you now.
The 2-2-2 credit rule is a guideline for building strong credit, suggesting you should have two active credit accounts (like cards or loans) for at least two years, with consistent on-time payments for those two years, often with a minimum credit limit of $2,000 per account, to demonstrate financial responsibility to lenders, especially for mortgages. It's a benchmark to show you can handle credit well over time, reducing lender risk and improving approval odds for major loans.
Pay in 3 is an unregulated credit agreement, so you will have fewer protections than under a regulated credit agreement. Consider if the purchase is affordable and how you will make repayments. Missing payments may make other borrowing more difficult or expensive. See our Spend Smarter Guide.
The PayPal "$600 rule" refers to an IRS requirement for third-party payment apps (like PayPal, Venmo) to report payments for goods/services over a certain threshold to the IRS via Form 1099-K, a rule delayed multiple times but originally set to become $600, though recent legislation has scrapped the low $600 threshold, replacing it with a much higher one (around $20,000 and 200 transactions for 2025), meaning most casual users won't get a 1099-K for personal payments, though all business income must still be reported.
PayPal may decide not to offer Pay in 3 as a payment option in certain circumstances, such as where their checks suggest an increased risk of fraud or where data they hold suggests you may not be eligible. The checks they run are with an external credit reference agency.
Watch out for these common scams:
While buy now, pay later schemes may seem attractive, excessive short-term borrowing can affect your ability to obtain a mortgage.
Then you can make an unscheduled repayment of full balance to pay off the entire Pay in 3 loan. There is no cost for paying off the balance early.
PayPal shares your Pay in 3 and PayPal Credit repayment history with the credit reference agencies, so missed or late payments will be recorded on your credit report. These negative markers can negatively impact your credit score.
With a 700 credit score (considered "Good"), you're well-positioned to get approved for most major loans like mortgages, auto loans, and personal loans with more competitive interest rates and terms than someone with a lower score, plus you'll qualify for better rewards credit cards and may even see lower insurance premiums. You can access a wide range of financial products, but to get the best rates, scores above 740-760 are often needed.
PayPal is a secure platform, and it takes all necessary measures to safeguard accounts. That said, a hacker could potentially access your PayPal account by obtaining login information from you through phishing attacks.
Use it to pay for subscriptions, games, apps, music, films, and more. Available on platforms such as PlayStation Store, Google Play Store, App Store, Spotify, Microsoft, and more.
If your PayPal Pay in 4 application is denied, it's usually due to your credit history, recent account activity, high requested amount, or overall debt, though PayPal's automated system may not give a specific reason; you can try again later, improve your account standing with timely payments, and check your PayPal message center for potential clues, but applying too often can lead to more rejections.
Overall, Pay in 3 is a convenient service for splitting larger purchases into more affordable, interest-free instalments. But, it's important to use the service responsibly to minimise potential risks and to avoid negatively impacting your credit report and score.
We may also decide not to offer Pay in 3 as a payment option in certain circumstances, such as where data we hold suggests you may not be eligible or where our checks suggest an increased risk of fraud. The checks we run are with an external credit reference agency.