Can PayPal be used as account on file for iTunes
CCould PayPal be used as payment on file for iTunes Store
iPad 2, iOS 7.0.4, Will not turn on or charge
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If you log into your account on your computer's iTunes does it show as an option on the payment details on your account ? As far as I know it's only currently available in the US, and you can only set it up via a computer's iTunes, not on your iPad.
Changing payment details : Change or remove your Apple ID payment information in the iTunes Store - Apple Support.