Credit Card + PayPal Money Transfer: Weighing the Rewards vs. Risks

PayPal is a well-liked option for online money transfers, whether you're purchasing for products and services or transferring money to loved ones. You may be wondering if it makes sense to transfer money using your credit card when making PayPal transactions, particularly when it comes to accruing reward points. We examine the benefits and drawbacks of using a credit card with PayPal as well as whether the substantial transaction costs may be justified by the incentives you receive.

Using Your Credit Card

Sending money to friends or family from your PayPal account may be done with a credit card. PayPal uses encryption to safeguard transactions on its platform, which lowers the risk of identity theft. Additionally, you could receive benefits for transactions handled through PayPal, similar to what you would receive for regular credit card purchases (cash back, points, or miles), depending on your credit card issuer or card.

However, be aware that transaction costs on money transfers may reduce the amount of incentives you might receive. PayPal charges a flat $0.30 cost for each transaction when you use a credit card to transfer money, in addition to a processing fee equivalent to 2.9% of the amount you send. Depending on the country of residence of the receiver and exchange rates, international costs might be much more. Even with a credit card that gives a cash back rate of 1.5 or 2 percent, the fees alone might cost you money.

In addition to that cost, certain card issuers may classify a person-to-person cash transfer as a cash advance, which entails higher APRs and costs than a regular transaction. Furthermore, there is no grace period; those hefty APRs are effective immediately upon processing the cash loan. The amount you spend could not even go toward the minimum required to qualify for any bonuses on your card if the transaction is categorized as a cash transfer.

It's not the least expensive way to send money, unless you're aiming for a big welcome bonus or using a card that increases your PayPal earnings.

If you use PayPal regularly, you might want to look into a credit card that gives you extra points for using PayPal. Among the choices are:

PayPal Cashback Mastercard

With no annual fees, you may earn limitless 2 percent cash back on all other transactions and 3 percent cash back when you spend with PayPal with the PayPal Cashback Mastercard®*. Additionally, you receive 3% cash back when you transfer funds to other PayPal customers.

Chase Freedom Flex

One of the well-liked credit cards, the Chase Freedom FlexTM *, includes revolving bonus categories that include increased 5 percent rewards on PayPal transactions. Additionally, it provides 1 percent cash back on all other transactions, 3 percent cash back on restaurants, and occasional promotions like 5 percent cash back on Lyft. With no yearly cost for any of this.