Paying Off Promotional Purchases vs Easy Payments Installment Purchases

[anamynous]

This is something that I just found out and is **bleep** me off, and I want to explain it to everyone who may not know how payments work in PayPal. 

In case you don't know already, Promotional Purchases are when you buy something with Paypal Credit and it says "No interest if paid off before a certain date." Easy Payments Installment Purchases (I'll call it EPI from here on) are when the purchases are divided into equal payments over a period of time (6 months/12 months). These Easy Payment Installment Purchases charge you an interest rate up front, so when you are purchasing your item you are paying 9% or more on top (rates can vary). 

I made a big purchase as a promotional purchase, and I had been trying to pay that off for the past few months, making large payments in excess of the minimum payment due each month. I just found out that none of those payments were going towards this promotional purchase, and instead have been paying off my various EPI purchases and some of them had up to 24 months of payments left. 

Paypal says that unless it's within TWO months of the expiration of your promotional purchase, your extra payments will not go towards them. So if you had purchased, let's say, a product for $2000 then you will have 2 months to pay that off. 

This method of payments does not make any sense to me. It's like having a car loan with a fixed rate of interest for 3 years, and then you decide to purchase wheels for your car that you have to pay off in 6 months to not pay any interest, but when you try to make payments for the wheels it instead goes to paying off your car early. Does this make sense to you guys? Especially since PayPal is charging you interest on those EPI purchases to give you time (6, 12, 24 months) to pay that off.

And Paypal will only be able to reallocate the very last payment you made, and you have to call in to have them do it manually. 

[Patriciajosephi]

Wondering how it worked... thanks for advice

[Android25]

PayPal has a breakdown of how your excess money will be applied on their help center.

Most debts work like this and it's why people who fall into credit card debt have such a hard time getting themselves out of it. Whenever you owe debts to an entity (Paypal in this case, but any person or business), any money paid will usually be applied to your highest APR debts, then to your oldest debts. In the case of PayPal easy payments, any easy payment balances are added to the minimum payment and money will be applied to those appropriately (they are after all, easy payments), then any excess money will go towards your highest APR debts, and to your oldest debts, in that order. If you have deferred interest balances or interest incurring balances remaining on your account, why would you want your money to go towards your payment plan balances? You've already agreed to pay PayPal an amount of money equally over a period of time, paying off easy payments faster won't save you any money, in fact, due to inflation, taking as long as you're allowed to pay something off without incurring interest is always in your benefit.

You also have to understand that in order to offer deferred interest loans, there has to be an opportunity to make money from them. This is why the agreement includes paying interest incurred from the beginning of the debt should you fail to pay in time. Whenever you take on a new debt, you should understand how your payments will be applied to it before agreeing to the debt. If you find out later, like you seem to have in this case, simply start putting money that you would have otherwise tried to apply to your short term deferred interest loans to the side, then in the two month period, you have that money on the side to apply immediately to the loan. In this way, it still feels like a monthly payment spread out over a period of time, rather than "having two months to pay off $2000" as you put it.

[Yup111]

Thanks for the info, I almost fell for this scam. Paypal is getting greedy and sneaky.