Using PayPal to Send Money: Should I Use My Credit Card Points?

When sending funds via PayPal, you are often faced with a choice of payment methods: a linked bank account, your PayPal balance, or a credit card. For those maximizing their rewards, a common question arises: using PayPal send money should i use my credit card points (or rather, the card that earns them) to optimize gains?

The short answer depends on the type of transaction—whether it is a "Friends and Family" payment or a "Goods and Services" purchase.

Credit Card Rewards vs. Transaction Fees

Using a credit card to fund a PayPal transfer is an excellent way to accumulate cashback, airline miles, or hotel points. However, PayPal distinguishes between personal and commercial transfers.

If you select "Sending to a friend," PayPal typically charges a fee for credit card transactions (usually around 2.9% + a fixed fee). In most cases, the value of the reward points you earn will be significantly lower than the cost of this fee. For example, if you earn 1.5% cashback but pay a 2.9% fee, you are effectively losing money.

When Using a Credit Card Makes Sense

There are specific scenarios where leveraging your credit card through PayPal is a strategic move:

1. Goods and Services Payments: When buying items, the seller usually covers the transaction fee. In this case, you earn full reward points on your spending without any additional cost.

2. Sign-up Bonuses: If you are trying to hit a "Minimum Spend" requirement for a new credit card to unlock a massive welcome bonus, paying the PayPal fee might be a small price to pay for a high-value reward.

3. Cash Flow Management: If you need to send money immediately but are waiting for your paycheck, the credit line provides a temporary bridge.

LSI Factors: PayPal Balance and Bank Transfers

For pure peer-to-peer (P2P) transfers, linking a verified bank account or using your existing PayPal balance remains the most cost-effective method. This avoids the "credit card convenience fee" entirely. If your goal is purely financial optimization, avoid using credit lines for personal transfers unless the specific reward multiplier outweighs the percentage fee.