4 ways for gift payment

Finding the perfect gift is one thing — paying for it is another.

#1 Debit card

Another way to pay for a gift is by debit card payment. Many current bank accounts have a linked debit card that account holders can use to pay for gifts in shops. Payment by debit card works by inserting the card into a reader and entering the required PIN or, for payments under £100, by tapping the card.¹

The money is then taken directly from the bank account. Paying by debit card is like paying in cash, and it has advantages and disadvantages.

Debit card advantages

Paying by debit card is an easy and safe way to pay for gifts. It offers other benefits as well:

• No interest. The gift is paid in full from the money in the current account, and it won’t accrue any interest charges, except in the case where the buyer goes into overdraft.

• Immediate access to funds. A debit card payment is instantaneous, and the money is debited from the account. When shoppers need to buy a gift and have money in their bank account but no cash in hand, they can get the gift by paying with a debit card.

• Convenience. A debit card is easy to use and widely accepted. It’s even possible to link it to a digital wallet. Most bank accounts have a linked debit card.

Debit card disadvantages

• No effect on credit score. Using a debit card to pay for gifts does not affect the user's credit score — good or bad.

#2 Credit card

Many who purchase gifts opt to pay by credit card. It’s an easy and secure payment option that lets the shopper spend up to an agreed-upon credit limit.3

There are advantages and disadvantages to buying gifts via credit card payments. although credit cards can involve costly interest charges, with proper usage, however, credit cards offer a flexible way to pay for gifts.

Credit card advantages

There are many reasons why people choose to buy gifts with their credit cards:

• More flexibility. People can purchase a gift that is within their credit limit at the time they need it and pay it back later.

• Credit card rewards. Many credit cards offer cash back or other types of rewards, which can help stretch the gift budget.

• Credit building. Those who spend within their credit limit, and always repay on time can help improve their credit scores. Planning for gifts and budgeting accordingly is always a good idea.

• Purchase protection. Gifts or other credit card purchases between £100 and £30,000 are covered by Section 75 protection if the product is faulty, which means the card provider can be liable to refund some or all of the money.²

Credit card disadvantages

As with any financial product, there are some negatives to consider when paying for gifts via credit card:

• Paying interest. It's important to use credit cards responsibly and pay what's owed on time to avoid paying interest, ultimately making gifts cost more than the purchase price. Credit card users should also always aim to pay at least the minimum monthly amount to avoid potential late fees, and lower credit scores.³

• It may encourage overspending. Some people may see the credit limit as money that is available to spend on things such as gifts. However, credit needs to be paid off as soon as possible to avoid interest charges.

• High annual fees. Some credit cards require an annual fee for their usage.. Some cards are better for long-term borrowing, some offer rewards, and some might be good for credit building.

PayPal Credit

UK residents who use PayPal’s digital wallet can also purchase their gifts with PayPal Credit, a digital, reusable credit line. It's like a credit card without the physical plastic card — and it can offer many benefits:

• Interest-free credit. People who buy with PayPal Credit get four months of 0% interest every time they spend £99 or more, which can help with the management of bigger gift purchases.

Representative Example:

Representative 23.9% APR (variable)

Purchase interest rate 23.9% p.a. (variable)

Assumed credit limit £1,200

• No annual fee. This digital credit line has no annual fee.

• Flexible usage. Once approved, PayPal Credit can be easily accessed, used, and managed in the PayPal app — allowing users to buy gifts online and pay back the amount in one convenient place.

• Widespread access. People can use PayPal Credit almost anywhere that PayPal is accepted. That's access to millions of online stores to help find the perfect gift.

• PayPal Buyer Protection. If a gift doesn’t arrive or doesn’t match the seller’s description, it may be eligible for buyer protection. Available on eligible purchases. Limitations apply.

• PayPal Credit is a regulated credit product. It is like a credit card and gives you a credit limit which can be used for promotional offers. During the 4 months’ offer period you must make your minimum monthly payment or your 0% offer may be removed. Any remaining balance due after the offer period or any transactions under £99 will be charged interest at your standard variable rate. Credit subject to status. Terms and conditions apply. UK residents only.

#3 Pay later services

Purchasing gifts can involve the need to save up or budget accordingly. PayPal’s buy now, pay later (BNPL) is an interest-free loan that may be used to buy the gift now and break up the payments.

In the UK, one BNPL product is PayPal’s Pay in 3.* If a gift costs £300, for example, a user would pay £100 right away, and then make two more £100 payments on the same date the following two months.

Some benefits of Pay in 3 include:

• No late fees. The purchase price of the gift is divided into three equal interest-free payments to be paid back over two months without any late fees, making it easier to budget for more expensive gifts.

• Availability. Pay in 3 is widely available, which means people can buy gifts at their favourite online shops and divide the payments up equally.

• Quick decision. When people find the gift they want, choose PayPal at checkout, and select and apply for Pay in 3. In most instances, the decision is almost immediate.

• Buyer Protection. PayPal includes Buyer Protection** with buy now, pay later services on eligible purchases and within a certain timeframe. Other terms and conditions may apply .

Pay in 3 is an unregulated credit agreement, so you will have fewer protections under this agreement than you would under a regulated credit agreement. Carefully consider whether the purchase is affordable and how you will make the repayments. Be aware of the possible impact of using Pay in 3 and of missing payments, including making other borrowing more difficult or more expensive. Pay in 3 eligibility is subject to status and approval. 18+ UK residents only. See product terms for more details. You can use Pay in 3 on purchases £30 - £2,000.

#4 Digital wallets

Gift shopping is not always easy, and when the buyer does find the perfect gift, they also have to figure out how they want to pay for it. It helps when payment options are all in one place, as in the case of a digital wallet.

But what exactly is a digital wallet? It's an app that stores an individual’s bank account information as well as debit and credit card information in one place on a digital device. It can be used to easily pay for gifts online or in a shop (by tapping their smartphone, for example). It's no wonder that increasingly more adults in the UK are embracing digital wallets. Registrations went from 30% in 2022 to 42% in 2023.³

There are many reasons why digital wallets are becoming more popular:

• Convenience. Having multiple cards and payment options in one place can help people make the right payment choice when purchasing a gift. Most bring their smartphone everywhere they go, and contactless payments are possible in many shops. Further, digital wallets do not have the same £100-per-payment limit as contactless plastic cards.

• Enhanced security. Digital wallets often have biometric security features, such as facial or fingerprint recognition, making them a secure way to pay for gifts

• Faster payments. Purchasing gifts in a shop can be quick — unlock the phone, hold it near the reader, and look for the check mark. Online payments can be just as fast: Go to checkout, select the payment card from the digital wallet, and confirm.

There are various safe and secure digital wallets available, and it’s possible to have more than one — to separate personal from business accounts, for example. PayPal has a digital wallet app that can be used to buy gifts online, send or receive money, and manage personal finances.

PayPal’s digital wallet

When people download the PayPal app, they can securely store their bank cards and account information in the digital wallet, keeping all payment methods in one place to pay for gifts or services.

When shopping for gifts online, individuals can often choose PayPal as a payment option at checkout and pay with the desired balance, one of the linked payment cards, or any other option such as PayPal Credit or Pay in 3 (subject to application and approval).