PayPal has teamed up with Citi and Chase to offer some new options for those who hold cards at these banks.
The most interesting of these new options is the ability to redeem your Citi ThankYou points and Chase Ultimate Rewards points via PayPal.
What these new partnerships give to cardholders
- Starting in 2018, you’ll be able to use ThankYou points with PayPal: Shopping with an online merchant that takes PayPal? You can pay with points at checkout instead of using your PayPal balance. This pretty much works like paying with points at Amazon, Live Nation and Citi’s other partners, and Dr. Of Credit has confirmed that points will have the same value when used via PayPal (0.8 cents per point).
- Starting in 2018, you’ll be able to use Ultimate Rewards points with PayPal: Shopping with an online merchant that takes PayPal? This works just like it does with Citi (see above). And the point value will likely be the same as it would if you took your points shopping with Amazon (0.8 cents per point).
- Inclusion in a “forthcoming NFC mobile experience”: The press release is vague on this point, but Chase cardholders will be able to use their Chase cards in-store in a new NFC payments “experience.” How this will be different from PayPal’s current PayPal Wallet remains to be seen.
- Seamless transition between Chase apps and PayPal: Even before this new partnership, you could add Chase cards to PayPal Wallet. But with Chase and PayPal now linked, you’ll be able to add your cards to PayPal without leaving the Chase app.
- Use Chase Pay with Braintree: Braintree is a payments processor owned by PayPal. You may have never heard of it, but it processes payments for services you use all the time, like Uber, OpenTable, Hotel Tonight and TaskRabbit. Chase Pay (Chase’s mobile payment app) will now be included as a payment option for all Braintree merchants, so you can use it for checkout when reserving a table or paying for a ride. That means you don’t have to go through a separate process of linking cards to these services.
Why should you care?
There’s good reason for PayPal to form these alliances, as powerful banking partners could help it gain a foothold in the cut-throat mobile-payments field. Plenty of consumers have yet to make the leap to mobile payments. And if PayPal can get Citi and Chase cardholders on board before competitors like Apple Pay do, that gives PayPal an advantage.
So what’s in it for you? The integration with Chase into PayPal’s app and Braintree might come in handy. But the most compelling result of these partnerships is the ability to redeem rewards when paying via PayPal. It’s convenient (you get to use your points on purchases you’d make anyway) and easy (you don’t have figure out how to use your points for travel).
Is redeeming your points for PayPal purchases a good option?
Let’s get this out of the way — it’s far from your best option. When it comes to redemption value, 0.8 cents per point is not a good one. You generally want to shoot for at least a penny per point. And, when it comes to Chase, there are plenty of ways to use your points that get you more than that. If you have the Chase Sapphire Preferred or Sapphire Reserve, you could transfer to Chase’s airline and hotel partners, which is generally considered the best way to maximize point value. Or if you redeem within Chase’s travel portal, you can get a value boost, which varies by card type. Finally, even if you have a no-annual-fee Chase cash-back card (like the Freedom Unlimited), you can still get 1 cent per point when redeeming for a statement credit (which you could use to refund yourself for a PayPal purchase).
The only time it makes sense for a Chase cardholder to use their points via PayPal is the convenience factor.
As for Citi, things are slightly less clear cut. Cash-back statement credits get you a value of only 0.5 cents per point (unless you have the Citi Prestige, in which case you can still get 1 cent per point when redeeming for cash back). So, redeeming for 0.8 cents per point via Paypal doesn’t seem so bad in comparison. Even so, with a little extra work, you can get more than 0.8 cents per point by transferring to airline and hotel partners or redeeming for travel via Citi’s portal.
The bottom line
The most intriguing aspects of PayPal’s partnerships with Citi and Chase remains to be discovered (What is this “forthcoming NFC mobile experience,” for example?). In the meantime, those who want to take advantage of PayPal as a new point-redemption option need to first consider all their other (better) redemption options.