The Synchrony Bank-backed cash back credit card soon will reduce the earnings potential of its rewards structure. PayPal recently notified existing cardholders that a reduction of cash back benefits is coming later in 2024.
And, though it has become one of Team Clark's favorite cards for online shopping thanks to 3% cash back on purchases made via PayPal, it soon will no longer qualify for our list of 2% cash back credit cards.
Let’s take a look at the upcoming changes and when you can expect them to take effect.
PayPal Will Decrease Everyday Cash Back Rate
The premise of the PayPal Cashback Mastercard® is pretty simple: Unlimited 3% cash back on purchases made with the card via PayPal and unlimited 2% cash back on all other purchases. No annual fee.
But according to an email distributed to cardholders in late May, the 2% cash back benefit will soon be a thing of the past.
Effective August 1, 2024, purchases made using your card (but not through PayPal checkout) will be reduced to unlimited 1.5% cash back.
The 3% back on purchases made through PayPal will remain unaltered.
Here’s a look at the modified cash back earnings that was distributed to customers via email in May:
- 3%: Each Eligible Purchase made by you through your PayPal account (online or in-store), or when you send money to other PayPal users through your PayPal account will earn 3% Cash Rewards.
- 2%: Each Eligible Purchase made by you everywhere else that Mastercard is accepted will earn 2% Cash Rewards until July 31, 2024 and thereafter 1.5%.
So, to recap: Between now and July 31, the rewards program will remain the same. On August 1st, you’ll see a half-percent reduction in your cashback earnings potential on non-PayPal purchases.
Is the PayPal Cashback Mastercard® Still Worth It?
If you’re a PayPal cardholder like me, you’re probably annoyed by this announcement.
You may even be considering ditching the card as a result. But is that the right move?
I believe it’s worth holding onto the card, but I wouldn’t apply for it as a new user at this time. And, if you keep it, I suggest modifying your usage of it. Personally, I’ll only be using it for PayPal purchases moving forward.
Let’s talk through it.
Projecting the Cash Back Earnings Loss
The primary reason I signed up for this card was to get 3% cash back on as many online purchases as possible. Even after these changes, that option still remains via vendors that accept PayPal at checkout.
But the unlimited 2% cash back on swipes and non-PayPal online transactions was a nice fallback to have. It made the card a viable “everyday spender” to put in the wallet.
So how much does that drop to 1.5% cash back really change things?
Here’s a quick breakdown of what the rewards reduction will look like at various annual spending levels:
| Annual Spending | 2% Cash Back Earnings | 1.5% Cash Back Earnings |
|---|---|---|
| $1,000 | $20 | $15 |
| $2,500 | $50 | $37.50 |
| $5,000 | $100 | $75 |
| $7,500 | $150 | $112.50 |
| $10,000 | $200 | $150 |
| $15,000 | $300 | $225 |
| $20,000 | $400 | $300 |
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Depending on your spending habits, it's reasonable to expect that you may lose somewhere between $10 and $100 per year on your cash back earnings potential if you keep using this card as your everyday swipe card. Not great.
Credit Implications of Closing the Credit Card Account
If you’ve calculated your potential cash back losses by continuing to use this card and are considering closing your account as a result, you may want to step back and think about the whole picture before making that decision.
Money expert Clark Howard actually addresses closing accounts in his 7 Rules for Using Credit Cards.
Clark says you should pump the brakes on the urge to cancel because it may have negative credit score consequences.
Here are a few reasons why:
- If you've had this card for a period of time, closing the card will shorten the average age of your lines of credit. This negatively impacts your credit rating.
- You'll lower your available credit limit by closing the card, which could negatively impact your credit utilization rates. Keeping your utilization low is a key piece to the credit score puzzle.
- Eliminating this credit card is taking away a chance to continue working positively on your payment history, which carries a 35% weight on the calculation of your score.
Perhaps the solution is searching for a new credit card to add to your wallet for everyday purchases and saving this card for PayPal purchases.
For example, the Alliant Cashback Visa® Signature Credit Card offers 2.5% cash back on purchases to select cardholders. That would net you an extra 1% cash back.
What do you think of these changes from PayPal and Synchrony? If you have the credit card, do you plan to continue using it? We’d love to hear your thoughts in the Clark.com community.
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