Should You Use Capital One Rewards to Pay for Merchandise Through PayPal?

Capital One has partnered with PayPal so that you can redeem your rewards to pay for purchases through PayPal. The free program, called Pay with Rewards, allows members to use rewards when checking out at millions of online stores including Target, Apple and Home Depot.

Here’s a look at how Pay with Rewards works and whether it could offer good value for you.

Capital One credit cards that offer Pay with Rewards

Not all Capital One credit cards work with Pay with Rewards, and the value of your rewards depends on which credit card you are redeeming from.

Cash back cardholders get a value of 1 cent each when you use them to check out through PayPal — just like when you redeem them for a statement credit or deposit to your bank account. For miles accrual credit cards that earn Capital One Miles, 125 miles are required to cover every $1 of the purchase price, giving your miles a redemption value of 0.8 cents each.

Here are the Capital One credit cards you can use with PayPal and the value you get from each.

How to use Capital One rewards to pay for purchases with PayPal

Adding your Capital One card to PayPal is easy.

1. Connect your accounts

To use Capital One Miles and cash back rewards to pay for your purchases, link PayPal to your Capital One account.

2. Select PayPal at checkout

Once you're signed up, you can shop online at any merchant that accepts PayPal for payment. When you’re ready to check out, select PayPal as your payment option.

Next, select your linked Capital One credit card and check the Pay with Rewards box.

3. Determine how many points you'd like to spend

You can choose how many of your rewards points to use for each purchase. If you don't have enough rewards for the entire purchase, you can make a partial payment using your rewards. The remaining balance of the purchase amount will be charged to your Capital One credit card.

The benefits of using Pay with Rewards

Aside from having a new way to redeem your rewards, there are several reasons why you might consider paying for your purchases with PayPal Pay with Rewards.

• Free return shipping: Eligible PayPal account owners can get up to 12 refunds per calendar year when returning items. Each return can receive a refund of up to $30 per claim.

• Purchase protection: You're entitled to a refund of the full purchase price plus shipping if the item was not received or if it is significantly different than it was described.

• Convenience: Using Pay with Rewards during checkout is fast and easy.

• No minimum spend required: There are no minimum spending requirements for your cash back or miles. Plus, you don't have to pay for the full purchase price with rewards.

» Learn more: Who benefits the most from the Capital One Venture Card?

Is using Pay with Rewards a good value?

You get the same 1 cent-per-point value through Pay with Rewards that you would get paying with cash and using your rewards to offset the cash purchase. But, you miss out on the opportunity to earn additional cash back on your purchase.

Cash Back cards

The best option for Capital One cash back cardholders is to purchase your items using your credit card, then redeem your cash back for a statement credit or a deposit to your bank account.

Miles accrual cards

For customers who have a Capital One credit card that earns miles, you are losing at least 20% of the value of your miles when using Pay with Rewards to check out. Remember: You’re only getting 0.8 cent value on miles that would be worth 1 cent apiece for other redemptions.

More valuable ways to use your miles

When you have a Capital One credit card that earns rewards, you have a number of options for your rewards. These options include:

• Wipe away purchases with statement credits.

• Shop with Amazon.

• Get gift cards.

• Redeem for cash.

• Transfer to airlines or hotels.

• Book a trip.

• Share your rewards with someone else.

Here’s a more in-depth look at a few reward redemptions that might get you more value than Pay with Rewards.

Statement credits

In addition to covering travel purchases, select cards, like the Capital One Venture Rewards Credit Card, let you redeem miles for charges in other categories.

Transfer to airlines

When you transfer your miles to an airline loyalty program, it's possible to get a much higher value for your rewards, up to 1.4 cents (depending on how you use those miles and points). Capital One currently offers transfers to 15+ airline programs, including partners like Emirates, Qantas and Air Canada.

» Learn more: The best Capital One transfer partners — and ones to avoid

Book a trip

You can use your miles to pay for a flight or hotel in two ways. Travel reservations can be booked through the Capital One Travel portal using rewards, cash or a combination of the two. Or you can book directly with the travel provider and "erase" your purchases afterward. Capital One allows cardholders to redeem miles for travel expenses up to 90 days after the transaction posts to their account.

You can opt to purchase Cancel For Any Reason travel insurance coverage on all flights booked through the portal when you pay a small fee at the time of booking. This can be a potentially wallet-saving perk in a COVID-era travel world.

The bottom line

Customers will appreciate that Capital One is adding alternative options for redeeming rewards. With many people putting travel on hold right now, it’s nice to be able to redeem rewards for merchandise.

Although Pay with Rewards may not return the highest value on your rewards, some cardholders will benefit from this new redemption option. The added benefits of free return shipping and purchase protection could make up for the reduced value when redeeming rewards.

Take a minute to connect your Capital One card and PayPal account so that you're ready to use this new benefit when it makes sense for you.