Revamped PayPal card raises rewards to promote digital payments

PayPal is relaunching its rewards-based Mastercard to include 3% cash back on all purchases where users check out with PayPal, as the company seeks top-of-wallet status through all shopping channels.

The new version of the card, issued by Synchrony Financial, will continue to offer 2% cash back on all purchases where PayPal is not a checkout option, and there is still no annual fee.

Existing customers will receive the new reward structure when it becomes available in the near future, and PayPal is offering new customers who join a waiting list a $100 bonus on their first $500 spent.

PayPal’s newest card encourages greater PayPal acceptance at stores. CVS is one of the few major retailers that support the PayPal and Venmo QR codes for checkout in its stores, a feature that went live in 2020.

The updated PayPal card shares some aspects of PayPal’s Venmo cash-back credit card, also issued by Synchrony Financial. That card launched in 2020 and gives users 3% cash back on purchases in their highest-spend category each month, 2% cash back on purchases in the second-highest category and 1% back on all other purchases.

Unlike many other popular cash-back rewards cards, PayPal's newest version doesn't give priority for spending in any particular merchandise category.

"Our customers shopped across 34 different categories last year showcasing the diversity of their needs and interests," Susan Schmidt, vice president of consumer credit at PayPal, said in a press release Tuesday.

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The Apple Card, which launched in 2019, offers 3% cash back on Apple purchases, 2% back when customers check out using Apple Pay and 1% on all other purchases.

Brian Riley, director of credit advisory at Mercator Advisory Group, said PayPal's boosted rewards aren't a game changer in an environment where JPMorgan Chase offers 5% cash back with its cobranded Amazon credit card.

However, the use of a QR code as a payment option is an upgrade over an earlier method of typing a phone number and PIN to access a PayPal account, he suggested.

"The QR code might help solve a longstanding issue for consumers who want to use PayPal at the point of sale; previously using a PayPal account at stores such as Home Depot was awkward and few clerks were able to explain how it works," Riley said.