How to shop with PayPal and earn reward points
Add a rewards credit card to your account and you can earn points per $1 spent through PayPal.
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A PayPal account gives you a secure place to store your payment details so that you don't have to enter them every time you buy something online. It also offers encryption for every transaction and reimbursement if items don't show up or are different from the seller's description.
Plus, you can still get reward or frequent flyer points when you link an eligible credit card to your PayPal account. So, let's take a look at how it works.
How does PayPal work with credit cards?
Once you have set up a PayPal account, you can add your credit card details to your PayPal wallet. Then, when you're shopping online, you'll just need to click on "PayPal" as the payment option, enter your login details and choose the card you want to use.
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How can I link a credit card to my PayPal account?
- Log in to your PayPal account.
- Click on "Wallet" at the top of the page.
- Select "Link a card", fill in your card details and follow the prompts to confirm the account.
After you have linked your account, you may see a $1 charge from PayPal on your credit card account. This is a temporary authorisation charge that PayPal uses to confirm the account is valid. Once that's confirmed, the $1 charge is released (so it's never actually taken from your account).
What purchases will earn points through PayPal?
In most cases, you'll earn points when you use PayPal to buy clothes, mobile devices, makeup, music or for any other retail purchases. Spending that usually doesn't earn points includes gambling transactions, foreign currency purchases, gift cards and any other transactions that may be processed as cash advances.
The terms and conditions for credit card reward schemes vary when it comes to "eligible transactions" that earn points, so check with your card provider for more information.
Pros and cons of using PayPal to earn credit card reward points
- Protection. As well as fraud and theft prevention, PayPal also makes sure you get what you pay for through its Buyer Protection program. You can get a full refund if your eligible order doesn't arrive or isn't as described.
- Convenient payment process. Instead of entering your card details and billing information, you only have to type in your PayPal login and password.
- Avoid card payment fees. Sometimes you can get around credit card payment fees by choosing to pay through PayPal. For example, Telstra applies a processing fee for payments made by card, but charges no fees for PayPal payments, even if you choose to pay through a linked credit card.
- Amex acceptance. If you have an American Express card, you may be able to get around the acceptance limitations and surcharges that some online stores have by choosing to pay through PayPal and then selecting the Amex card as your preferred option.
- Switching to a new platform. If you've never used PayPal before, it could take time to get used to the service.
- Not always a payment option. While PayPal is accepted by a wide range of stores, including eBay, The Iconic, Woolworths, Optus and Telstra, there may still be times when you need to type in your credit card details to make a purchase. Find out which stores accept PayPal with this guide.
- Overspending. The ease of making payments with PayPal, coupled with the ability to earn points for purchases, could lead you to rack up more credit card debt and interest charges.
- Reward variations. Your card's reward scheme may differ when using PayPal compared to using your card directly. Contact your credit card provider directly to find out exactly how PayPal payments will be treated in terms of rewards.
What else do I need to know?
If you want to use a rewards credit card through PayPal, make sure you keep the following details in mind:
- Transaction details. When you make a payment through PayPal, your credit card statement may show "PayPal" for the transaction description, rather than the store where you made a purchase. This could make it hard to figure out what every purchase is unless you check your purchase history through PayPal.
- Foreign currency charges. If you're buying something in a foreign currency, PayPal automatically applies its own foreign currency conversion rates. This is 3.5% above the exchange rate for purchases in US or Canadian dollars, or 4% above the exchange rate for purchases in any other currency, which could be higher than the rates offered by your credit card provider. It's also hard to figure out how to change this setting in PayPal, but you can set it to your credit card's rate through this link: https://www.paypal.com/cgi-bin/webscr?cmd=_manage-paylist
- Points processing. While your payments will go through straight away with PayPal, it could take a day or so for the transaction and points to show up on your credit card account.
- Security. Both PayPal and credit cards offer security features to help keep your details safe when you shop online. But if you're using a credit card through PayPal and have security concerns, you may need to contact both PayPal and your card provider to sort them out.
While you could just enter your credit card details every time you make a purchase online, PayPal can speed up the process while still allowing you to earn points for your spending. Just remember to regularly log in to your credit card account so that you can check your balance, make repayments and see exactly how many points you've earned for PayPal purchasesBack to top
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