PayPal Cashback Mastercard Review: No Annual Fee and Up to 3% Cash Back

If you want to earn as much cash back as possible, the PayPal Cashback Mastercard® is a great choice. It earns an unlimited 2% on purchases and 3% on PayPal purchases. Big cash back and no annual fee can be a valuable combination. See what else it has to offer in our PayPal Cashback Mastercard® review.

This credit card is a good fit for: People looking for a simple, no-frills option that offers an excellent cash back rate on their spending.

Features and benefits

The PayPal Cashback Mastercard® is light on perks. But it has an excellent cash back program and is as easy as it gets to use. If you're looking for simplicity and a card you can use for all your spending, it could be the right pick.

As good as it gets for flat-rate cash back

With cash back cards, you have two basic options. You can get a card with bonus categories. These cards normally earn 3% or more in bonus categories and 1% everywhere else. Or, you can go with a card that earns the same flat rate everywhere. With these cards, the highest rate I've seen is 2%.

This is a flat-rate card with an even better cash back rate, earning:

• when you check out with PayPal
• on other purchases

The rate applies online at stores that offer PayPal Checkout, as well as in stores that let you pay with the app. Millions of merchants offer these options, so you should have plenty of chances to earn when you shop. And when you don't, you'll still be earning .

RELATED: The Ascent's Best Credit Cards for Online Shopping Hub

Convenient cash back redemptions with no minimum

Some credit card companies make it harder than it should be to redeem your cash back. They only let you cash in your rewards once you meet a redemption minimum. This can be $5, $10, and in some cases, even $25.

It's an annoying restriction, which is why I always appreciate when a card issuer goes in the opposite direction. PayPal lets you redeem any amount of cash back, including as little as $0.01. You can transfer it to your PayPal account, and then either use it there or deposit it to your bank account.

You also don't need to wait long to get your cash back. After you've made an eligible purchase, your cash rewards from that purchase will be available in approximately three days. Many credit cards only pay out cash back once a month, so it's a much faster process with a PayPal card.

Start using your card right away

When you get approved for a cash back card, you'll probably want to start using it and earning cash rewards as soon as possible. With the PayPal Cashback Mastercard®, you can -- through PayPal, at least.

In most cases, PayPal issues a temporary credit line as soon as it approves your application. If so, you'll have a virtual card that you can use for PayPal purchases right away. You'll still need to wait for the physical card for other types of purchases.

Drawbacks to know about

There are a few valuable benefits that other cash back cards offer, but this one doesn't. Before you apply, it's worth knowing what you'll be missing out on and how much it could cost you.

Poor upfront value with no sign-up bonus

The PayPal Cashback Mastercard® doesn't have a welcome bonus -- an introductory bonus offer available to new cardholders. Most of the top rewards credit cards have this type of bonus.

Considering how much you can save from a welcome bonus, not having one is this card's biggest drawback. To give you an idea of what other cards offer, there are plenty of cash back cards with welcome bonuses worth $200 or more. You can often earn these bonuses in three months or less, after spending at least $500 to $1,000.

With a PayPal card, it could take as much as $10,000 in spending before you earn $200 cash back. If you find another card with a cash back program you like and a welcome bonus, it could be the better option.

A bad choice for international travel because of its foreign transaction fee

You can use this card anywhere Mastercard is accepted, but I wouldn't recommend using it outside the United States. It charges a N/A foreign transaction fee, costing you more than you'll earn in cash back.

Many credit cards have done away with foreign transaction fees, so it's frustrating when a card still charges one. It's especially frustrating in this case, because the PayPal Cashback Mastercard® didn't always charge this. It used to have no foreign transaction fee, but PayPal later added one.

If you plan to travel abroad at all, you may want to look into travel credit cards. Or at least cards with no foreign transaction fee.

Doesn't have complimentary protections to keep new purchases safe

It's not the most well-known perk, but lots of credit cards include complimentary insurance on eligible purchases. Here are a few examples:

• Did your brand-new iPad get damaged or stolen? If you bought it with a card that has purchase protection, you could file a claim to get reimbursed.
• Wondering whether you should spring for the extended warranty they're trying to sell you at the store? Pay with a card that has extended warranty coverage, and you won't need to.
• Did you just miss the return window on an item? If you paid with a card that has return protection, you could use that benefit to get your refund.

These are all protections that other cards offer. This PayPal credit card doesn't offer any complimentary protections for your purchases. Personally, I wouldn't use it for big-ticket purchases for that reason. I'd rather go with a card that will cover me in case of any issues.

No 0% intro APR to finance purchases or help pay off debt

Another popular perk that this card doesn't have is a 0% intro APR. Some cards don't charge interest on purchases, balance transfers, or both for an introductory period. The longest 0% intro APR offers can last 15 months or more.

Not having a low intro APR isn't always problematic, because not everyone needs this benefit. If you always pay your credit card bill in full, which is what I'd recommend, then you won't be charged interest. In that case, the interest rate won't matter.

But you may need a 0% intro APR if you plan to pay off a large expense over time, or if you have credit card debt you want to refinance with balance transfers. If so, this card won't work for you, and you'll need to check out other credit card reviews.

A FICO Score® of 670 or higher is recommended to apply for the PayPal Cashback Mastercard®. Like most of the top credit cards, it's intended for consumers who have good credit. Remember that credit card applications depend on more than just your credit score, so having a high score doesn't guarantee your application will be improved.

You need a PayPal account to apply for this card. You can sign up for one online, and there's no fee to open an account. It should also be noted that if you already have PayPal's other credit card, the PayPal Extras Mastercard®, you can't get the PayPal Cashback Mastercard®. The policy is one PayPal-branded credit card per person.

For more options, review our picks for the best credit cards for good credit.

You'll love the PayPal Cashback Mastercard® if you want one cash back card to use for your expenses. Since flat-rate cards earn a respectable amount back on purchases, consumers often find that they get the most cash back by using this type of card. And when it comes to flat-rate cards, the 3% cash back rate for PayPal purchases, and 2% for everything else, on the PayPal Cashback Mastercard® ranks at the top.

The biggest issue with this card is that, besides the cash back rate, it doesn't have much going for it. For example, there's no sign-up bonus. And if you want a 0% intro APR, you won't find it here. But if your main goal is earning plenty of cash back, this PayPal credit card does a very good job of it.

Our credit card methodology

At The Motley Fool Ascent, we rate credit cards on a five-star scale (1 = poor, 5 = best). Our rating criteria includes rewards rates, welcome bonuses, fees, and perks like travel credits and 0% intro APR offers to evaluate our ratings.

We combine these factors with an evaluation of brand reputation and customer satisfaction to ensure you're getting the best card recommendations. Learn more about how The Ascent rates credit cards.