PayPal Cashback Mastercard (2% Cash Back) Review

PayPal Cashback Mastercard

  • Annual fee: $0
  • Sign-up bonus: $0
  • Earns 2% cash back on all purchases
  • No foreign transaction fees

Like with most other credit cards in its class, the PayPal 2% card comes with a handful of protections:

  • Extended warranty protection
  • Price protection for 60 days
  • Identity theft resolution
  • Microchip Technology

The PayPal Cashback Mastercard is issued by Synchrony Bank, and customer service is run through them as well. You must have an active PayPal account to apply. Cashback earned from the card is deposited directly into your PayPal account.

Who should get this card?

If you're someone who travels and wants to use a simple 2% cash back card, then the PayPal 2% card might be the choice for you since it doesn't have foreign transaction fees.

Drawbacks

I personally wouldn't get this card for four reasons:

1. Mastercard benefits

The PayPal Cashback Mastercard is issued by Synchrony Bank, whose benefits and claim process is a hassle to deal with compared to other credit issuers like American Express, Visa, or Citi. The Citi Double Cash card might be a better choice if you plan on using benefits because you'll be dealing with the Citi Benefits team.

Citi has Mastercards (i.e., Double Cash, Prestige, etc.), but they provide benefits above and beyond the default.

2. No sign-up bonus

As of March 31, 2018, the PayPal Cashback Mastercard does not have a sign-up bonus, but this could obviously change in the future.

I recommend getting a card that earns 1.5% cash back with a $150 signup bonus. To earn $150 on a 2% card, you'll need to spend $7,500. 

Why Sign-up Bonuses Matter

  • Option A: 1.5% + $150 signup bonus
  • Option B: 2% + $0 signup bonus

"Making" $150

  • $150 / 0.02 = $7,500
  • You need to spend $7,500 * 2% = $150 in cash back

You'll also need to factor in opportunity cost. The main difference is 0.5%, which you'll need to spend $30,000 to break even. 

Opportunity Cost

The example above doesn't include opportunity cost (spending the same $7,500 on the 1.5% card), factoring that in:

  • $150 / 0.005 = $30,000
  • You need to have lifetime spend of $30,000 to breakeven

Math:
a) = 2% * $30,000
    = $600 in cash back

b) = 1.5% * $30,000 + $150 bonus
    = $450 + $150
    =$600 in cash back

3. No product change options

The main problem with the PayPal card is that there are not any product change options. If your behavior changes in the future and you start to value 5% cards or travel, then the PayPal card will lose its value. 

For larger credit issuers like Chase and Citi, you have a handful of product change options. For example, if I had a Chase Freedom card and I wasn't interested in the cash back categories, I could product change the card to a Chase Freedom Unlimited. 

4. Risk of PayPal account shutdown

I've heard a few horror stories about PayPal shutting down personal and business accounts. Since the cash back earned is deposited directly into your PayPal account, you risk losing those funds if your account is closed.

I'm not sure what happens to the PayPal credit card if your PayPal account gets shut down. How you use your PayPal account plays a huge role here. 

Bonus: Travel

If you are someone who plans to travel in the future, it might make sense to get a travel credit card instead. Feel free to fill out a free card consultation form if you want some card recommendations.