By Jill Jaracz


5 Min. To Read

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PayPal is jumping into the cash back rewards credit card market with a new Mastercard that offers two percent cash back on all purchases, both online and in stores, wherever Mastercard is accepted.

Two percent cash back is on the high end of the cash back rewards spectrum, but it comes with a catch--consumers have to already have a PayPal account in good standing in order to apply for the credit card. A PayPal account allows you to send and receive money to individuals and companies, and it can be tied to a bank account for transfers.

The two percent cash back is good on all eligible purchase, so everything minus returns, credits, adjustments, balance transfers, cash advances, convenience checks and disputed transactions. There is no limit on the amount of rewards a cardholder can earn, and there aren't any restrictions on when they can be redeemed--cardholders don't have to wait until they accrue a fixed amount, as with other rewards cards. The fine print of the card terms says that there may also be bonus periods where certain categories may offer more than two percent rewards; however, PayPal says there won't be any rotating categories to keep track of, as with other cashback rewards programs like Discover.

To redeem rewards, cardholders can credit them toward their card balance or transfer them to their PayPal account. If they're transferred, the cardholder can then use them in any way they use their PayPal wallet balance to make PayPal-enabled payments or transfer them into a bank account where they can then be withdrawn for cold hard cash.

PayPal wants to make sure that cardholders remain PayPal customers, so in order to keep the cashback rewards, cardholders need to keep their PayPal account in good standing, and they also need to keep it linked to the card. If, for any reason, the two aren't linked, the card account will be closed and the cardholder will forfeit any rewards that haven't been redeemed.

Issued by Synchrony Bank, the card has no annual fee and a variable purchase APR that varies based on the cardholder's creditworthiness, at 16.99%, 24.99% or 27.99%, which PayPal classifies as Account Type 1, Account Type 2 and Account Type 3. The terms stipulate, "A limited number of applicants are expected to receive Account Types 1 and 2." This likely means that a good portion of accounts will have a really high APR when it comes to is interest rates.

However, consumers who don't carry outstanding balances from month to month will find this less of an issue. Consumers who do carry a balance can expect to pay a minimum of $1.50 in interest.

Other terms of the card include a 27.99% APR on cash advances with a $5 fee or three percent of the advance, whichever is greater; a 23-day grace period after the close of each billing cycle; and late payment fees up to $38.

The card comes with Mastercard benefits, such as extended warranty protection, 60-day price protection, zero fraud liability and identity theft resolution.

"The introduction of the PayPal Cashback Mastercard with Synchrony Bank continues PayPal’s commitment to provide customers with rewarding product experiences and a range of innovative credit options," said Mark Britto, senior vice president, Global Credit, PayPal, in a statement. "By providing a simple way for people to earn cash rewards for the shopping they’re already doing, the PayPal Cashback Mastercard will give consumers yet another reason to shop with PayPal."

PayPal has a second Mastercard called the PayPal Extras card. It allows cardholders to earn rewards points on purchases that are redeemable for gift cards, merchandise, travel vouchers or cash deposited into their PayPal account.

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