Negative Changes To PPBDC On October 19th, 2016 (Debit Transactions To No Longer Earn Cash Back) – Paypal

Paypal has announced that they will be making changes to their user agreement on their Paypal Business Debit Card Agreement. These new terms will go into effect on October 19th, 2016.

• View the old terms here
• View the new terms here

Of interest is the following:

Eligibility. To be eligible for cash back:

1. You must have a PayPal Premier or PayPal Business Account, and you must have enrolled in the cash back program.
2. Your Debit Card purchase must be authorized as a credit transaction and processed via MasterCard.  Some merchant locations offer you the option of choosing “Credit” or “ATM/Debit” when making a payment. To qualify for cash back, you must choose the “Credit” option if shown at the merchant location.
   1. Transactions eligible for cash back include: Credit transactions which you sign for and which are processed via MasterCard; online transactions processed via MasterCard; and phone transactions processed by MasterCard.
   2. Transactions that are not eligible for cash back include, but are not limited to purchases processed via a debit network (including PIN-less debit transactions); cash withdrawals; and cash advances.
   3. Please note that merchants ultimately determine whether to process your Debit Card payments as credit or debit transactions, and PayPal has no control over the merchant’s selection.

This means that if the transaction isn’t processed as a credit transaction, you won’t receive cash back on these charges. A lot of companies (e.g RadPad/Plastiq) offer lower fees for debit purchases because they are charged a lower fee by their payment processor. This means that the card issuer (in this case Paypal) also receives a lower interchange fee (due to limits on what fees can be charged on debit purchases because of the Durbin Amendment), prompting this change.

It’s likely that Paypal were happy to lose money on some transactions, as they were making enough money on the transactions processing as credit and this is no longer the case due to the volume of these debit transactions. Earlier in the year Paypal also made it so that PIN-less debit transactions wouldn’t earn cash back as well.

Hat tip to reader Vic J & /r/churning