PayPal Cashback Mastercard® Review: A perfect fit for PayPal users?

The PayPal Cashback Mastercard® could be a hit for PayPal fans and has the potential to one day be a great no-annual-fee rewards card for everyone else.

This card not only offers unlimited 2 percent cash back on all purchases — which is a great flat rewards rate — but also 3 percent back when you shop with PayPal. Few flat rate cards go the extra mile by offering bonus categories on top of a flat rate that’s higher than the typical 1 percent cash back found with most flat-rate cards.

Unfortunately, though, you may not have an easy time figuring out which purchases earn 3 percent cash back. It’s not clear how many stores let you make purchases through your PayPal account, and some may only let you pay through your PayPal account when making online purchases.

The card is also light on benefits, lacking a sign-up bonus, intro APR offer and other benefits that help give rewards cards long-term value. Read on to learn more about the PayPal Mastercard and see how it stacks up against the best cash back cards.

Quick highlights

• Rewards rate: 3 percent cash back on purchases made through your PayPal account or when you send money to other PayPal users, 2 percent cash back on all other purchases
• Welcome offer: N/A
• Annual fee: $0
• Purchase intro APR: N/A
• Balance transfer intro APR: N/A
• Regular APR: 17.24 percent, 26.24 percent or 29.24 percent (variable)

Current welcome offer

Unfortunately, the PayPal Cashback card doesn’t currently offer a sign-up bonus to all applicants. However, some users have received a prescreened offer that includes a chance at a limited-time sign-up bonus of $150 after spending $500 within the first 90 days.

While welcome offers are short-term benefits and shouldn’t be the first or only feature you look at when choosing a card, the majority of rewards cards for people with good credit and higher offer these incentives. And at a time when inflation and rising interest rates are impacting the wallets of so many, this puts the PayPal card at a disadvantage.

Many of the top flat-rate rewards cards offer a generous rate of 1.5 percent or more in cash back rewards along with sign-up bonuses worth $200:

The PayPal Mastercard goes further than most flat-rate cards by offering not only a flat cash back rate on general purchases, but also bonus cash back for purchases made through your PayPal account. If you do a lot of online shopping or you frequently shop at stores that let you pay with PayPal, this could give the PayPal card enough long-term value to make up for its lack of a sign-up bonus or intro APR offer.

If you’re not a PayPal user, you may prefer a more versatile rewards card like the Chase Freedom Unlimited®. Its flat rate is slightly lower than the PayPal card’s, but it also earns rewards in a variety of popular bonus categories that could help you overcome that difference. The card also has a range of benefits you won’t get with the PayPal Mastercard, including a sign-up bonus, intro APR offer on purchases and balance transfers and a complimentary DashPass subscription.

Earning cash back

On top of its impressive 2 percent flat cash back rate on all purchases, the PayPal Mastercard offers a bonus rate of 3 percent cash back on PayPal purchases (including at stores that let you pay using the PayPal app). Depending on how often you pay using PayPal, this could be a powerful combination of rewards.

Most flat-rate rewards cards — like the Wells Fargo Active Cash Card and the Citi Double Cash Card — only offer a flat rate on general purchases, with no additional bonus categories. This can keep things relatively simple and hassle-free, but it means you may miss out on a higher rate in your biggest spending categories.

Meanwhile, a number of bonus-category cards earn 3X points or more in select categories, including the Capital One SavorOne Cash Rewards Credit Card (which earns 3 percent cash back on groceries, dining and entertainment) and the Wells Fargo Autograph℠ Card (which earns 3x points at gas stations and on travel, restaurants and more). But these cards, like most other bonus category cards, only earn 1 percent back on general purchases.

By pairing a flat 2 percent rewards rate on general purchases with 3-percent cash back on PayPal purchases, the PayPal Mastercard makes a good effort at trying to combine the best features of flat-rate and bonus-category cash back cards. However, there are a few caveats to keep in mind.

To earn 3 percent cash back you have to be the primary cardholder, as authorized users will only earn 2 percent cash back at all times. You also have to make purchases through your PayPal account. This can be done online or in-store as long as the merchant accepts PayPal as a form of payment. If the store doesn’t accept PayPal, you’ll earn 2 percent cash back.

If you’re already a PayPal user and have a good idea of the stores that let you use your PayPal account, this card could be a good fit — especially if you don’t already have a card that earns three percent cash back or more at these locations.

For everyone else, it won’t be easy to find out where PayPal is accepted. PayPal lists some merchants, such as Walmart, Best Buy, and Home Depot, but it doesn’t offer a full list of merchants. And some merchants are selective in how they accept PayPal. For example, Target only accepts PayPal on Target.com and the Target app. If you’re not already familiar with the merchants that accept PayPal, you’ll likely have an easier and more rewarding experience if you use the PayPal Mastercard to cover general purchases and pair it with another rewards card that earns bonus points in your top spending categories.

Redeeming cash back

To receive cash back, you must have a PayPal Cash account, PayPal Cash Plus account or a standard PayPal account with a linked debit card or bank account.

Even then, your PayPal credit card cash back isn’t automatically added to your balance. You must log into PayPal and transfer the cash rewards to either your PayPal balance or your linked debit card/bank account. Luckily, you can redeem any amount of cash back you choose from your rewards balance.

This probably isn’t a big deal if you’re considering a PayPal credit card in the first place, but creating an eligible account and the extra steps might not be worth it if you prefer another digital wallet program or simply want direct cash back.

The value of cash back rewards tend to be consistent and are usually easier to estimate than points and miles values. Each percentage point of cash back you earn with the PayPal card is worth 1 cent. So you’ll earn 2 cents for every dollar spent in the 2 percent cash back category ($20 for every $1,000 spent) and 3 cents for every dollar when earning 3 percent cash back ($30 for every $1,000 spent).

The good thing about having limited redemption options is that you don’t have to worry about the value of your rewards changing depending on your redemption options. Some cash back cards with a variety of redemption options may offer 1 cent per point for options like statement credits but reduce the value to 0.8 cents or less for other options like gift cards.

Other than the cash back rewards, the PayPal Mastercard is light on the features usually found with rewards cards. There are plenty of no-annual-fee cards that come loaded with perks, including, sign-up bonuses, intro APR offers, and a slew of secondary benefits like purchase and travel protections.

That said, the PayPal card offers a handful of standard Mastercard benefits like zero liability protection for unauthorized purchases, lost and stolen card reporting and emergency card replacement.

The PayPal Cashback Mastercard doesn’t charge an annual fee, though it does have a few common credit card fees you’ll have to watch out for, like foreign transaction and late fees.

The card’s regular APR is 17.24 percent, 26.24 percent or 29.24 percent (variable) depending on your creditworthiness. The 17.24 percent rate is slightly below the average credit card interest rate, making it a decent option for a low-interest credit card — if you’re one of the lucky few to get that rate. Synchrony Bank, which issues the PayPal Mastercard, states in the card’s terms and conditions that “a limited number of applicants are expected to receive” the first two interest rates.

Having interest charges tacked onto your credit card bill can eat away at the rewards you earn and makes it harder to pay off your balance. But a rate as high as 29.24 percent can do far more damage, pushing you into credit card debt if you tend to carry a balance.

You may also want to steer clear of using the card to transfer money. PayPal doesn’t charge a fee to send money to other PayPal users as long as you transfer money using your PayPal balance or bank account. But if you use a credit card, there is a 2.9 percent fee along with a fixed fee, which is currently 30 cents.

Unless you start collecting interest charges, the PayPal Cashback Mastercard is a pretty low-cost card with a nice cash back rate. But considering the card’s limited features, other cash back cards might be a better fit.

PayPal Cashback Mastercard vs. the Citi® Double Cash Card

The Double Cash doesn’t offer a chance at 3 percent cash back, but it certainly delivers in other areas. It earns up to 2 percent cash back (1 percent back at purchase, 1 percent when you pay) on all purchases. The Double Cash card is a great balance transfer card with its 18-month, 0 percent intro APR on balance transfers (18.24 percent to 28.24 percent variable ongoing).

PayPal Cashback Mastercard vs. Blue Cash Everyday® Card from American Express

The Blue Cash Everyday Card from American Express doesn’t have a great flat rate — you’ll only earn 1 percent cash back on general purchases — but the card’s bonus categories could give people on a budget more than enough chances to rake in considerable cash back.

The card earns 3X points at U.S. supermarkets, U.S. gas stations and U.S. online retail purchases on up to $6,000 per calendar year in purchases in each category (then 1 percent). That gives you an average of $500 per month to spend in each of the bonus everyday spending categories. And since the card classifies merchants using Visa’s merchant category codes, you’ll likely have an easier time knowing which stores earn the 3 percent rewards than you will with the PayPal Mastercard.

Best cards to pair the PayPal Cashback Mastercard with

Since the PayPal Cashback card already offers a nice flat rate and the chance to earn triple bonus points, consider pairing it with a rotating category card like the Chase Freedom Flex℠. This card offers 5 percent cash back in quarterly rotating categories (upon activation, on up to $1,500 in purchases, then 1 percent back). The Freedom Flex also earns unlimited 5 percent back on Chase Ultimate Rewards travel and unlimited 3 percent on dining at restaurants and drugstores and 1 percent on other purchases. If you don’t mind tracking so many categories, the combination of these two cards could help you rake in a considerable amount of cash back.

On top of the rewards, the Chase Freedom Flex makes up for the limited amount of benefits offered by the PayPal card. It comes with a sign-up bonus and an intro APR offer on purchases and balance transfers that could give you more than a year to pay down your debt. It also comes with World Elite Mastercard benefits, giving you far more perks than you’ll find with the PayPal card, such as cellphone protection, trip cancellation/interruption insurance and auto collision damage waiver.

The PayPal Cashback Mastercard offers a top-notch flat rewards rate on both general purchases and online or in-store shopping through PayPal. This is a rare combination that gives the card good long-term value — as long as you can take advantage of the PayPal bonus category. If you don’t shop at stores that earn the higher rate, you may be better off with a different flat-rate card that comes with better perks like a sign-up bonus or intro APR offer.

*If you have previously opened a Rewards Checking account or do not open one as part of this application process, you are not eligible for the Upgrade Cash Rewards Elite Visa® welcome bonus offer.