Update 8/11/26: This issue has now been fixed, according to this comment it did seem to be an error on PayPal’s side.
This “glitch” has now apparently been fixed. However, when it was a problem, it was PayPal’s fault and not Synchrony’s and here’s the proof.
PayPal has a standard fee structure where they would charge a percentage plus a fixed flat fee. Typically, for the merchant fee, they would charge 3.49% + $0.49 and this is the fee structure that was used in this “glitch”.
So apparently, PayPal inadvertently implemented their merchant fees for people who simply just want to redeem their credit card rewards.
For those who had a portion of their credit card rewards deducted as a fee upon redemption, you should call PayPal to get that money credited back to you, even if it’s just for a small amount.
Currently there is an issue affecting PayPal credit cardholders. When cardholders are redeeming rewards to their PayPal balance a fee is being charged. When contacted PayPal claims they are not charging any fee and to call the card issuer (Synchrony). When Synchrony is contacted they claim that no fee is being charged and to contact PayPal. I suspect what has happened is that there is a bug/issue caused by PayPal removing the Redeem For Cashback for PayPal rewards. For now I’d recommend cardholders don’t redeem towards their PayPal balance until the issue has been resolved. We have reached out to both PayPal & Synchrony for comment.
Hat tip to reader S