PayPal’s new credit card pays 3% cash back on all PayPal purchases

PayPal is revamping its co-branded PayPal Cashback Mastercard credit card, issued by Synchrony, which will now give users 3% cash back when they check out using PayPal and 2% cash back on all other Mastercard purchases. The company says the higher rate can be used whenever a customer pays with PayPal, including if they pay online, on mobile devices or even in-store using a PayPal QR Code.

The company notes that its existing cardholders will be automatically upgraded from the prior 2% cash back rate to 3% on their PayPal purchases. It will also soon make the card available to new customers through the PayPal mobile app and in the weeks ahead.

Along with the cash back upgrade, which is the key feature of this new card, PayPal says it has updated the user interface for card management within the app and on its website to make it easier for customers to access their rewards, manage their purchases and make payments. In addition, customers will now be able to access their rewards every day instead of having to wait for a monthly statement cycle. And they’ll be able to choose how they want to use rewards — including to either make statement purchases, shop from retailers or transfer funds to a linked bank account or debit card.

To encourage new sign-ups, PayPal is incentivizing customers with a $100 cash back bonus on the first $500 spent on the card, which has no annual fees.

The consumer-friendly improvement to the credit card comes as PayPal faces increased competition from buy now, pay later (BNPL) firms in the e-commerce space. For example, Afterpay in December teamed up with Rakuten to allow shoppers to earn cash back rewards when they made installment purchases from participating merchants. In the same month, Affirm also launched its own Cash Back program. And of course, retail giant Amazon offers its own cash back rewards that pays 3% for both Amazon and Whole Foods purchases.

“Our customers shopped across 34 different categories last year showcasing the diversity of their needs and interests, and we wanted to build a credit product that was flexible and better matched rewards with their spending behaviors,” said Susan Schmidt, VP of Consumer Credit at PayPal, in a statement. “The new PayPal Cashback credit card was designed so PayPal customers can earn rewards and get cash back for everyday purchases no matter what categories they spend in that month.”

PayPal’s news came on the heels of mixed Q4 2021 earnings, announced in February, which saw the payments company blaming issues like the eBay transition, inflation, supply chain issues and more for its weaker guidance, revenue pressure, and slower user growth. But more broadly, PayPal is up against a range of competitors in both online and mobile payments, including the built-in mobile payment systems Apple Pay and Google Pay, the various BNPL firms, Amazon’s own checkout and peer-to-peer rivals like Cash app and Zelle.