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PayPal Debuts a Credit Card That Offers 2% Cash Back (bloomberg.com)
PayPal is turning to its old nemesis, plastic, to help it expand beyond the digital realm. From a report: The online payments venture is introducing a credit card that offers customers 2 percent cash back on purchases -- one of the industry's highest rebate rates -- with no annual fee. The rewards will appear in users' online wallets and can be spent immediately on additional PayPal purchases or transferred to a bank. The move is part of Chief Executive Officer Dan Schulman's effort to transform PayPal from a payments button on websites into a versatile financial tool for everyday use, even in brick-and-mortar stores. He's forged 24 deals over the past 18 months with technology and financial companies including Apple, Visa and JPMorgan Chase, looking to make PayPal ubiquitous in the lives of its 210 million customers. The company already tested the card with some of them.
With they way they unnecessarily seize the monetary assets of 100s of thousands of their customers, you're going to need the 2% cash back in order to justify your relationship with them.
Let's make like a bird... and get the flock outta here.
Do they still randomly confiscate contents of your accounts? I guess since this is a credit card product, now they will also have an ability to max the credit card for you.
Bigger players can't do this.
Large merchants pay under 2% plus a couple of cents per transaction. Much of that goes to the merchant's bank / underwriter / payment processor, not the card issuer. The issuer makes their money on interest and annual fees.
PayPal can do this because they deposit 2% into a PayPal account and gouge 3% from the PayPal merchant when you use it.
For normal cards to do this, the card issuing bank would need to get at least 3%, which means the merchant would need to pay 5%, which would end up coming out of the customer's pocket.
So this would be awful if it caught on with other issuers.
Credit card companies provide convenience. I never have to worry about having the right amount of cash or dealing with change or stupid cashiers. Not to mention they scale to the internet and other transaction scenarios where cash is inconvenient or impossible. That's worth it to me. I think you'd also be surprised at a retailer's attitude in having a stable, audit-able, and secure transaction platform that doesn't require hiring security forces.
Merchants also provide convenience. I mean you could just pick your items up on a dock for cheaper. Are you happy paying that middle man? What about the middle man that shipped the goods? Do you buy direct from the manufacturer? Why aren't you harvesting it yourself?