UPDATE 3/21/22: PayPal just announced the PayPal Key program will be going away in late April 2022. It was fun while it lasted...
At first, this sounded too good to be true. However, I have used this tactic for almost a year now and have earned tens of thousands of points with it! Read on to find out how you can do this too!
What is PayPal Key?
Last year, 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 real card number from being exposed and can be used anywhere MasterCard is accepted.
However, this is not the main reason why we are interested. The real surprise is 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 (do you see where this is going???).
Some Possible Uses:
- buy items at places that only take Mastercard
- qualify for bonus categories (e.g. Freedom Flex Q4 2021 Paypal category)
- pay at places that charge lower/no fees for debit (e.g. apartment rent portal)
- hide your true card number for security reasons
- ability to switch out payment method at a later time (e.g. you want to buy a Mac but don't have your new card yet, but you need to place order now. You can enter your PPK number and as long as your Mac hasn't shipped out yet Apple probably won't charge you, so it can buy you additional time until your new card arrives)
Why Do I Care? (+ why use it with Chase Freedom Flex)
Many places charge a much lower fee when using debit versus when it is credit. It is common for a flat fee (e.g. $2.99) to be charged for for debit card transactions as opposed to a set percentage for credit cards (e.g. 3%).
Combined with special quarterly categories such as the
upcoming (Oct-Dec) (NOW EXPIRED) 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!
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 for the remainder of the payment, which earns
1.5x points with no cap, so you can still make a healthy profit from money you're going to spend anyways.
Will this work if I don't have Chase Freedom Flex card?
You can still get
1.5x (2.25%+) back using the same technique when using a card like the Chase Freedom Unlimited(review), or 2% back on the Capital One Venture X (review) and it should earn the base rate on most other credit cards. Note that PayPal Key no longer works with Amex.
I've created a short step-by-step video showing exactly how to do this:
1. Login to your PayPal account and click on the "Wallet" tab, you should see PayPal Key as an option appear on the left side panel.
2. Select your PayPal Key and you will be brought to the following screen (see below). Here you can choose which credit card you want to be "paying with":
As described earlier in this article, the best cards are Chase Freedom/Freedom Flex when PayPal is a 5% category (like Q4 2021!).
3. Click on "See PayPal Key" to see your generated virtual card number. Copy this down in a secure location, you will use it in the next step.
4. Log-in to the place where you want to make the transaction. In this example, I will be logging into my apartment complex's rent payment portal. My apartment allows credit 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 fee for debit, no matter the amount.
That's it! Enjoy seeing that
5x on your rent payment!
I paid $1500 towards my rent, since $1500 is the maximum you will get
5x on for each Freedom card per quarter. This is when it is incredibly useful when you have multiple Freedom cards (such as when downgrading an old Chase Sapphire Preferred).
$1,500 * 5 = 7,500 UR points
At the minimum, this is worth
$75-3.95 = $71.05 in profit after subtracting the apartment processing fee. If you hold the Chase Sapphire Reserve, you can redeem with an extra 50% boost, so
$106.58 in value! - that is over 7% return on spend!
Additionally, if I decide to transfer these points out to travel partners like World of Hyatt or United MileagePlus (example: to redeem EVA Air Business Class), I could be looking at an estimated value of $300-800+!
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This site is for informational purposes only. Contents and opinions expressed are the author's alone and your experience may vary. The author is not a financial/investment/tax/legal professional of any kind. CreditFred strives to provide the most accurate and up-to-date information possible, but the strategies and tips provided should not be replicated before you conduct your own research and, if needed, consult with a financial professional.