PayPal Credit Card Adds Broad Three Percent Cash Back Category


The PayPal Cashback Mastercard®, which previously offered a flat 2% cashback on every purchase, now offers unlimited 3% cashback when using PayPal. This includes online, mobile and in-store transactions. All other purchases earn 2% cash back.

Because PayPal can be used so widely, it’s now one of the most lucrative cash back cards. Only a few niche options can top the rewards rate of PayPal Cashback Mastercard.

Cards offering more than 2% cashback in general

For example, the Alliant Cashback Visa® Signature credit card offers 2.5% cash back on up to $10,000 in eligible purchases per billing cycle (and then 1.5% cash back). To qualify for the 2.5% rate, cardholders must also have an Alliant High Rate Chequing Account with an average daily balance of at least $1,000 during the previous quarter.

The Federal Credit Union AOD Signature Visa Credit Card offers unlimited 3% cash back on every purchase, but its approval process is notoriously difficult.

The USALLIANCE Visa Signature credit card also offers 3% cash back on everything, but the promotion expires at the end of 2022.

Finally, the Discover it® Miles card grants effective cash back of 3% on everything during the cardholder’s first year. It gives 1.5 miles on every purchase and these are doubled at the end of the first year (and each mile can be worth a penny when redeemed as statement credit). However, in the second year and beyond, this rate is halved without the introductory bonus which doubles the number of miles.

What is eligible for PayPal’s 3% category

PayPal is accepted by 29 million merchants, according to its 2020 annual report. That includes more than 700 of Internet Retailer’s top 1,000 online retailers, reports Digital Commerce 360. Unfortunately, there are some notable omissions, such as Amazon. com. Still, there are plenty of ways to pay with PayPal.

It has been possible to use PayPal Key as a workaround when PayPal is not directly accepted online, although this is about to change. PayPal announced that the program was discontinued on April 20, 2022.

The possibilities of using PayPal in person are limited. Walmart, CVS and 7-Eleven are among a select group of retailers that accept PayPal in stores via QR codes. Hopefully this program will grow, but for now PayPal Cashback Mastercard holders should expect to earn most of their 3% rewards online.

Should you get this card?

The PayPal Cashback Mastercard was previously more comparable to cards such as the Citi® Double Cash Card and the Wells Fargo Active Cash℠ Card. These are cards with no annual fee that give 2% cash back on all purchases (in the case of Double Cash, technically 1% when a cardholder makes a purchase and an additional 1% when they redeem it).

The PayPal Card offers new cardholders $100 off their first $500 in purchases. Active Cash is a bit more generous, awarding $200 in cash rewards after new cardholders spend $1,000 in their first three months. Double Cash does not currently offer a welcome bonus. Beyond the introductory bonus, the PayPal Mastercard is now a more lucrative card than these other two, given the introduction of the PayPal 3% category.

Cards like these serve two main purposes. One is for someone who wants to keep it simple. They don’t want to be bothered with rotating categories or annual fees or memorizing which card offers the best rewards on certain types of purchases. It’s actually a surprisingly lucrative strategy. Because while other cards may boast four, five, or six percent cash back on some purchases, they often give a meager 1 percent cash back on most other purchases, and they often have caps of spending on their most profitable categories. If you use one of these cards heavily, your average reward rate could end up well below 2%.

This brings us to the other scenario: using a card such as the PayPal Mastercard as your base guarantees that you won’t get less than 2% cash back on any purchase. You can layer other cards with more generous rewards on certain types of spend while maintaining that high floor. It’s a bit more complicated, but mathematically it’s worth it. You just need to be prepared to put in the effort to juggle different cards for different types of purchases.

The bottom line

The more you use PayPal, the more your PayPal Cashback Mastercard rewards rate will exceed the 2% benchmark that has always been the high end of the traditional cashback market. I am seriously considering getting this card. To gauge the potential benefit, I’ll focus on how many of my purchases I could make through PayPal.

Have a question about credit cards? Email me at [email protected] and I’d be happy to help.


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