Sounds too good to be true right??? Well... I tried it and it's true! Read on to find out how you can do this too!
UPDATE 1/1/2020: Q4 2020 PayPal 5x Category for the Freedom/Freedom Flex has ended. You can still get 1.5x (2.25%+) back using the same technique when using the Chase Freedom Unlimited(review), and it should earn the base rate on most other credit cards. Note that PayPal Key no longer works with Amex.
Recently, PayPal launched a new virtual card feature called PayPal Key. In simplest terms, it wraps your actual card with a virtual card, thus protecting your actual card number from being exposed (not really useful) and can be used anywhere MasterCard is accepted (much more useful).
Well, this suddenly opens the door for many opportunities, such as using your card at places that don't usually take American Express. In addition to that, this new virtual card seems to be processing as a debit card, even if the actual card you are using underneath it is a credit card. Wow!
Many places charge a much lower fee when using debit vs. credit, and more often than not charges a flat fee (e.g. $2.99) as opposed to a set percentage for credit (e.g. 3%).
Combined with special quarterly categories such as the current (Oct-Dec) 5x back on the Chase Freedom Flex and Chase Freedom (closed to new applicants), this essentially allows you to pay a flat fee and get 5x Chase Ultimate Rewards (UR) Points!
Recently, I decided to give this a try and paid $1500 towards my rent. My apartment allows credit/debit cards but charges a set percentage that doesn't make it worth my money to use a credit card. However, it charges a flat $3.95 for debit, no matter the amount.
$1,500 * 5 = 7,500 UR points
At the minimum, this is worth $75, so this alone netted me $75-3.95 = $71.05 in profit. Since I hold the Chase Sapphire Reserve, I can redeem with an extra 50% in value, so $106.58 - that is over 7% return on spend! If I decide to transfer these points out to partners like World of Hyatt or United MileagePlus (for say, EVA Air or other Star Alliance partners), I could be looking at an estimated value of $300-800!
Keep in mind that Freedom / Freedom Flex quarterly 5x categories cap out at $1500 per card, and after that amount, you will only receive 1x back. In this case, I recommend using the Chase Freedom Unlimited card, which earns 1.5x base points with no cap, so you can still make a healthy profit from money you're going to spend anyways.
If this helped you and you are in the market for one of those new cards, consider applying via my referral link.
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