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Apple's iTunes now accepting PayPal

Customers who buy songs, albums and gift certificates at the music store can use eBay's wallet technology to pay.

Customers at Apple Computer's iTunes store will now be able to pay for their songs, albums and gift certificates using PayPal, a virtual-wallet technology owned by eBay.

PayPal's program allows consumers to fill out an account using credit cards or checks. The wallets can then be used to pay for goods online.

The system is popular among online auctioneers and small sites because it allows them to accept payments without having to pay transaction fees to credit card companies.

eBay has been working to expand PayPal as more of a mainstream payment solution. Earlier this year, PayPal also signed a deal with digital music service Napster.

"It's very important for us from a brand point of view to want to bring credibility to our efforts to expand off of eBay," said Todd Pearson, general manager of merchant services at PayPal. Signing with Apple "will get a lot of credibility," he said.

Apple is offering a special promotion for PayPal users; it is giving away five free songs to the first 500,000 U.S. customers who open a new iTunes account using PayPal before March 31, 2005.

Financial terms of the deal were not released.