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PayPal to launch buy now pay later option and inactivity fee

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Written by: Emma Lunn
14/10/2020
PayPal customers will be able to pay in three interest-free instalments, but there’s also a new inactivity fee if you don’t use your PayPal account for a year.

Online wallet PayPal has announced two upcoming account changes. The first is a buy now pay later option, similar to Klarna. The other is an activity fee for customers who don’t login to their account, or make a transaction, for 12 months.

PayPal Pay in 3

PayPal’s Pay in 3 service gives customers the option to pay for purchases between £45 and £2,000 in three instalments at no extra cost.

It’s touting the service as a way for businesses to drive more sales and revenue.

Under the scheme, PayPal covers the full cost of the goods for the retailer or business at the point of sale, and automatically takes the payment instalments on their due date.

PayPal says retailers including Crew Clothing, French Connection, Robert Dyas and Ryman have already signed up for Pay in 3. The payment option will be available in the UK from late October, in time for Black Friday and the Christmas shopping period.

PayPal Pay in 3 will appear in customers’ PayPal wallets, so they can manage their payments online or via the PayPal app. Missed payments will result in a £12 fee.

Rob Harper, UK director of enterprise accounts at PayPal, said: “During the coronavirus pandemic, we have seen the number of people in the UK shopping online increase dramatically. At the same time, many more consumers are looking to spread the cost of those purchases.

“PayPal Pay in 3 offers a flexible way for over 24 million PayPal users to shop while providing companies with a tool that helps drive sales, loyalty and customer choice.”

PayPal inactivity fee

PayPal is also planning to introduce an annual fee of up to £12 for users whose accounts have been inactive for a year or more.

From 16 December 2020, users will be charged the fee if their accounts have been inactive for at least 12 consecutive months.

The fee will be the lesser of £12 or your account balance. But if you don’t have any money in your account, you won’t be charged at all.

“Inactive” means a user hasn’t sent, received or withdrawn money, or logged into their account for a year.

PayPal users can avoid the fee by logging into their account before 15 December, or making a transaction. You’ll then need to login to your account at least once every 12 months to avoid the fee in future years.

Withdrawing any cash in your account will also stop the fee being taken in the future.

PayPal said it will warn inactive customers that they could be charged a fee by sending a notification 60 days, 30 days and then seven days before the fee is set to be charged.

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