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Understanding Rewards Debit Cards
Debit cards are not typically known for their rewards, but some offer points or cash back on eligible purchases. These rewards programs can be a simple way to earn extra cash, but it’s essential to understand the program’s rules before signing up. Here’s a detailed look at how rewards debit cards work.
What Is a Rewards Debit Card?
A rewards debit card is linked to your checking account and allows you to earn rewards based on your purchases. These rewards can be in the form of cash or points, which can be redeemed for travel, merchandise, and more. Each program has its own terms, conditions, rewards rates, and rules on qualifying transactions and maximum earning potential.
For example, a rewards debit card might offer 1% cash back on up to $3,000 in purchases. To remain eligible for these rewards, you may need to follow specific rules, such as maintaining a minimum daily balance.
Which Debit Card Transactions Earn Rewards?
When you open a rewards checking account, review the program’s terms and conditions to see which transactions qualify for rewards. These usually include:
- Signature-based transactions: This involves signing the sales receipt at an online or in-store checkout. Some terminals require you to select the “credit” option first and then provide the debit card and sign the receipt.
- PIN-based purchases: A PIN transaction can also be available online or in a store. You’ll swipe or insert the debit card (or type in the details) and then enter your unique PIN.
Depending on the debit card rewards program, you might not earn rewards on certain transactions, such as online subscription payments, ATM transactions, peer-to-peer payment app transfers, purchases you return, illegal purchases, online sports betting, internet gambling transactions, purchases of currency, cash equivalents like gift cards, and loan payments.
What Types of Rewards Can Your Debit Card Earn?
Each program is different, but they often offer the following types of rewards when you use the debit card linked to your checking account:
- Cash back: You may earn a percentage of the amount you spend, such as 1%, or the bank may pay you a flat amount, such as 5 cents, for each debit card transaction.
- Points: Some programs give you points for every dollar you spend on each qualifying debit card purchase. You may be able to redeem those points for cash in your account, travel purchases, and gift cards.
- Discounts: You may also have the option to log in to your account online and choose from a menu of available discounts, such as 15% off when using your debit card with a select retailer.
At the end of the applicable rewards period—usually monthly or annually—your bank will add up all of your eligible rewards. Cash is typically deposited into your checking account, while you may need to spend your points in a special shopping portal.
Are Rewards Debit Cards Worth It?
Rewards debit cards can be worthwhile if you meet the program’s requirements, such as maintaining a minimum balance in your account. Ensure the account either has no fee or allows you to earn enough rewards to outweigh the fee. If you use the rewards debit card for purchases you were going to make anyway, you won’t risk overspending just to earn a little bit of cash back.
Also, consider how often you use your checking account and whether your normal transactions will qualify for the rewards. If you use your debit card infrequently, it might not be worthwhile to open a new checking account solely for the purpose of earning rewards.
Pros and Cons of Debit Card Rewards
Pros
- Rewards: The main benefit is the potential to earn points or cash back on purchases you were planning to make anyway.
- Extra features: Checking accounts with rewards debit cards may also offer perks like ATM fee reimbursements, identity theft recovery services, cash back on your checking account balance, and early access to direct deposits.
Cons
- Earning limits: Banks and credit unions usually set limits on the amount of rewards you can earn per year or each month.
- Eligibility requirements: To qualify for rewards, you may need to meet requirements like maintaining a minimum monthly checking account balance. Falling short one month may result in no rewards or a lower rewards rate.
- Monthly fees: Some banks and credit unions charge a monthly fee to use your checking account, which can eat into or negate your cash back earnings.
- Risk of overspending: If you have to spend a lot to earn the maximum cash reward, it may cause you to spend more than you budgeted just to earn rewards. You might also miss out on higher rewards by using a credit card.
The Bottom Line
Debit card rewards programs offer a way to earn cash back or points on purchases. Many checking accounts with rewards programs also come with special tools and features to make money management easier. However, these programs may have eligibility requirements or charge monthly fees, so consider whether the program is right for you.
If you’re thinking about opening a new checking account, consider the Experian Smart Money™ Digital Checking Account & Debit Card. It can help you build credit without debt by linking to Experian Boost®ø, which gives you credit for eligible bill payments after three months of payments. You’ll also pay no monthly fees¶ for Experian Smart Money, have access to more than 55,000 fee-free ATMs worldwide**, and could receive your paychecks up to two days early when you enroll in direct deposit†. You can get an Experian Smart Money Account through a free or paid Experian membership, which also gives you access to your FICO® Score☉, Experian credit report, and more. See terms at experian.com/legal.
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