PayPal Says It Will Issue Credit Card to Its Clients Through Providian

Online payment broker PayPal announced Tuesday that it will issue a secured credit card to its 6 million account holders through Providian Financial, the nation’s fifth-largest issuer of Mastercards and Visas.

As part of the co-branding agreement, San Francisco-based Providian also invested an undisclosed amount in Palo Alto-based PayPal, which had previously raised about $170 million in venture capital.

Since starting out as an obscure computer security company, privately held PayPal and its holding company, X.com, have developed one of the nation’s fastest-growing payment systems.

PayPal makes its money by charging a fee to transfer payments between buyers and sellers through e-mail.

As it has grown, PayPal has introduced more bank-like services, such as interest payments, to encourage its members to keep balances in their online accounts instead of cashing out.

The new credit card, which will be unveiled in the spring, represents another step in PayPal’s effort to keep more money in its pipeline. Providian will set the credit card limits based on how much digital cash PayPal’s members have in their accounts.