Why the PayPal Rewards change is not the end of PayPal

I recently got into the PayPal ecosystem because I was interested in the PayPal Debit Card’s 5% category cashback. As I looked into it more, I started paying attention to the rest of PayPal’s rewards setup too.

I’m making this post because I keep seeing people say that the August 1 change, where PayPal Rewards points can no longer be redeemed for direct cash back, is basically a death sentence for the debit card. I agree that the change is bad, but I do not think it makes the card useless. From what I have found, there are still workable ways to get solid value from the points.

Debit Card

As most people know by now, the remaining redemption options appear to be gift cards, charity, and checkout redemption.

The biggest workaround seems to be gift cards through Honey. From what I have found, these gift cards redeem at 1.0 cent per point, which is the same value people were getting from cash back. The merchants I currently see on Honey are Groupon, Amazon, 1-800-Flowers, Nike, Lowe’s, Google Play, Athleta, Banana Republic, Old Navy, Gap, Ace, Chipotle, Wayfair, Grubhub, and Nordstrom Rack.

To me, that is a meaningful list. Gift cards are obviously not the same as cash, but if you already spend regularly at any of those merchants, you can still convert your PayPal Rewards points into something close to cash-equivalent value. In that sense, the 1.0 cpp value can still live on even after the direct cash-out option goes away.

The other remaining option is redeeming points at checkout. I have not found a reliable way to confirm a full list of merchants where this currently works. My assumption is that it may overlap with some of the same merchants available through gift cards, but I cannot confirm that. I have also seen people say Walmart can be used for checkout redemption at 1.0 cpp, which, if true, would be another very practical option.

Credit Card

I also want to mention the PayPal Cashback Mastercard, which gives 3% cash back when you check out with PayPal. From what I understand, that card is not affected by the August 1 change because its cash back is not earned in PayPal Rewards points.

That card can also stack well with PayPal offers. For example, if PayPal gives you a 5% Adidas offer, you can use the PayPal Cashback Mastercard through PayPal checkout and effectively stack that 5% offer with the card’s 3% cash back. One important detail is that the PayPal offer is usually based on the subtotal reported by the merchant, while the 3% card cash back applies to the full transaction amount. Another thing to keep in mind is that PayPal offers are typically paid out as PayPal Rewards points, so those rewards are still affected by the August 1 redemption change. In many cases, those PayPal offer points also take around 60 days to post. Honey can also help on top of that by finding coupon codes before checkout.

I personally have the Robinhood Gold Card and use the PayPal Cashback Mastercard partly to lower my utilization on the Gold Card while still earning solid rewards on PayPal purchases.

Conclusion

Overall, I agree that removing direct cash-back redemption for PayPal Rewards points is a real downgrade. But I do not think it completely kills the value of the ecosystem. If gift cards remain easy to access at 1.0 cpp, and if checkout redemption continues to work at useful merchants, then there are still pretty easy ways to make the 5% debit card worthwhile.

I also think the PayPal Cashback Mastercard still helps keep the ecosystem useful, since it offers a straightforward 3% cash back through PayPal checkout and can still stack with PayPal offers. To me, the ecosystem is less dead than it is just more annoying now, because you have to be more intentional about how you redeem and use everything.