PayPal has launched its rewards credit card in Australia: how does it stack up?

ELLIE MCLACHLAN
Mega payments platform PayPal has launched its PayPal Rewards Card in Australia, despite recent data showing credit cards continue to fall out of favour with Australians who have shrunk their debt or moved it to buy now pay later services. We’ve crunched the numbers to see how the new card stacks up.
Paypal launching credit card
PayPal is launching a credit card in Australia. Image source: LDprod, Shutterstock.com.

What is the PayPal Rewards Card and how does it work?

The PayPal Rewards Card is a credit card with an interest rate of 20.99%, no annual fees and uncapped rewards. Customers can earn rewards points with every eligible purchase and these points won’t expire, PayPal says. The card will be available to use via the PayPal digital wallet as soon as a customer is approved for it, before the physical card arrives in the post.

Customers can redeem their rewards points for eligible purchases when checking out with PayPal online, or apply the points to offset the cost of a recent purchase on the card. The payments platform said Australian customers will be able to redeem points at over 750,000 businesses around the world, including over 300,000 in Australia.

Customers can track their spending and rewards points balance in the PayPal app.

The card is available to use anywhere Visa is accepted globally, and all eligible purchases will be covered by Visa’s Zero Liability policy, meaning the customer wouldn’t be held responsible for unauthorised charges made with their card if it is lost, stolen or fraudulently used.

The credit card is be issued by Citigroup, using the financial institution’s Australian Credit Licence, bypassing the need for PayPal to secure its own licence to lend money in Australia.

PayPal has reportedly said Citi’s efforts to sell its consumer banking business in Australia will not affect how the PayPal Rewards Card operates.

PayPal Rewards Card
PayPal Rewards Card. Image supplied.

PayPal card arrives in declining credit card market

The PayPal Rewards Card arrives at a time when many Australians are slashing their credit card debt – albeit at a modest pace – reducing the value of purchases made and ditching their cards.

Credit card data from the Reserve Bank of Australia showed Australians’ personal credit card debt accruing interest grew slightly in May, to a total of $20.06 billion. That number has come down by $3.73 billion (around 15.7%) in the past year, however.

The data also revealed there were around 40,300 fewer personal credit card accounts in May than the month before, and 856,400 fewer than in May 2020.

When PayPal announced its new credit card in June, Canstar finance expert Steve Mickenbecker said it was no wonder the payments platform was bucking the trend by launching a credit card in this declining market.

“They’ve got such a position of strength in the online retail space and they can leverage on that from three angles: they can look at the usage patterns of existing PayPal users, they can offer the PayPal credit card as a link to the PayPal online payments system, and they can link the rewards to PayPal’s merchandising partners,” Mr Mickenbecker said.

“It would be tougher for a new player to make inroads in a physical marketplace, because you’re just competing with everyone else and your offer is no different.”

The card is an extension of PayPal’s other payment options Aussie shoppers are used to seeing online, which also include the platform’s Pay in 4 buy now pay later service.

Mr Mickenbecker said there had been a long-term decline in the number of credit cards used and those with balances paying interest, which was no doubt partly due to buy now pay later services displacing the use of credit cards.

PayPal General Manager of Payments Andrew Toon said the new credit card would give Australians flexibility in earning and spending rewards points, after the pandemic left many Australians with travel-related points they couldn’t use as planned.

How does the PayPal Rewards Card stack up?

Canstar’s research analysts looked at the 68 rewards credit cards currently on our database and found that the PayPal Rewards Card is one of only six with no annual fee.

American Express has three such credit cards with no annual fee, BankVic has one (which now also includes a 6.99% six-month interest rate) and Coles has another. At the time of writing, all of those cards have purchase rates lower than PayPal’s 20.99%.

We crunched the numbers and found the American Express Essential Credit Card would have the cheapest monthly repayments and interest costs among those no-annual fee cards and PayPal’s card.

To repay the average debt accruing interest on personal credit cards in Australia of $3,998^ in two years, our calculations show people with an the American Express card would pay around $194 per month and $653 in interest compared to PayPal’s $205 in monthly repayments and $932 in interest. The repayment and interest calculations assume interest is calculated daily and charged at the end of the month, and that repayments occur at the end of each month.

Here’s a comparison of the interest rates and rewards points on credit cards with no annual fee on Canstar’s database, including the PayPal Rewards Card:

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Card Purchase rate Rewards points on eligible purchases
American Express’ Essential Credit Card 14.99% 1.25 Membership Rewards points per $1 spent
BankVic’s Qantas Visa Credit Card* 16.95% 0.5 Qantas points per $1 spent (plus one bonus Qantas Point per $1 spent on Qantas flights)
Coles’ No Annual Fee Mastercard 19.99% 0.5 Flybuys points per $1 spent
American Express’ Qantas Discovery Card 20.74% 0.75 Qantas Points per $1 spent (plus 1 bonus Qantas Point per $1 spent on eligible Qantas products or services)
American Express’ Velocity Escape Card 20.74% 0.75 Velocity Points per $1 spent (plus 1 bonus Velocity Point per $1 spent on eligible Virgin products or services)
PayPal’s Rewards Card 20.99% 1 rewards point per $1 spent

Source: www.canstar.com.au – 23/07/2021. Based on unsecured credit cards on Canstar’s database. List sorted in ascending order by purchase rate. List is not exhaustive and may not list all rewards credit cards with no annual fee. *BankVic Qantas Visa Credit Card is only available to Police Association of Victoria and Victorian Ambulance Union members.

 ^Based on the total credit card accounts and balances accruing interest in May 2021 per the RBA Credit and Charge Card Statistics (original values); assuming 40% of personal credit card accounts are revolving a balance and therefore accruing interest, based on the Canstar 2020 Customer Satisfaction Survey (n=5,787).


Compare Credit Cards with Canstar

The table below displays some of our referral partners’ rewards credit cards for Australian’s spending around $3000/month and redeeming points for cash/vouchers. The results shown are sorted by highest star rating, then alphabetically by provider name. Use Canstar’s credit cards comparison selector to view a wider range of credit cards. Canstar may earn a fee for referrals.

 

Original story by Ellie McLachlan, additional reporting by Alasdair Duncan.


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This content was reviewed by Sub Editor Tom Letts as part of our fact-checking process.


Ellie McLachlan is responsible for leading and breaking financial news on home loans, savings and much more. Ellie studied a Bachelor of Journalism and Arts at UQ and has worked at major metropolitan and regional news organisations.

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