A brief history of debit card rewards

Every time you make a purchase with a debit card, the retailer has to pay a fee to the bank that issued your debit card. Before 2010, these fees were largely unregulated, and debit card reward programs were abundant. Then along came the Dodd-Frank Wall Street Reform and Consumer Protection Act, which put a cap on the fees banks could charge via the act’s Durbin Amendment.

This was good for merchants, as they payed lower fees, but it also meant banks made less money from debit card transactions. As a result, many banks got rid of their debit card rewards programs, and while some programs are still around, they’re not nearly as commonplace as they once were.

Are debit card rewards worth it?

Debit card rewards programs may be an easy way to earn cash back and other perks, but the rewards aren’t always as rewarding as they seem at first glance. Let’s take a look at the pros and cons:

Pros

• Get debit card rewards for everyday purchases: If you’re using a debit card to pay for regular purchases all the time, you might as well get rewarded for it. Enroll in a debit card rewards program and just keep spending like before — it takes zero extra effort to start racking up rewards.
• There are many fee-free debit card rewards programs to choose from: Generally there are no initial or recurring fees for debit card rewards (avoid the few programs that do charge fees). In most cases, you have nothing to lose by enrolling, although some accounts require a minimum balance to open an account.
• Debit card rewards avoid the risk of racking up interest charges: Credit card rewards programs generally offer more attractive rewards, but interest accrues if you don’t pay off your balance each month. The cost of interest almost always outweighs any benefit you would get from rewards. With debit cards, you’re never at risk from interest charges.

Cons

• They’re less common than they once were: Due to the Durbin Amendment regulatory reforms mentioned above, there are fewer debit card rewards programs to choose from these days. Fewer programs means fewer options, so it could be more challenging to find the one that’s right for you.
• There are more credit cards rewards programs, with better rewards: Credit card rewards programs weren’t affected by the Durbin Amendment, so there are more credit card rewards programs, and they often offer more generous rewards.
• It can take a lot of time to build up rewards: The rate at which debit card rewards programs accumulate rewards is lower than with credit cards. Because it takes more time to accumulate debit card rewards, you have to be more patient before you see material gains.
• Debit card rewards may expire: In addition to being patient, you also should be persistent in staying on top of your rewards, as some may expire if you don’t use them within a certain window.

While not as abundant as they once were, there are some solid programs still standing that are worth looking at.

BankAmeriDeals

Bank of America customers can participate in the BankAmeriDeals program, which provides cash back on deals from a variety of retailers, including hotels, restaurants and other merchants. You activate your deals online, then earn cash back (typically 10% to 15% of what you spend) when you use your BofA debit card or credit card.

Discover Cashback

This no-fee checking account from Discover allows you to earn 1% cash back on up to $3,000 in debit card purchases each month. That means you can earn up to $360 a year just by shopping as you normally would.

Chase Disney Visa Debit Card

This one’s for devoted Disney fans. You don’t earn rewards with the Chase Disney Visa Debit card, but you are rewarded with shopping, entertainment and vacation perks. For example, you save 10% when shopping at Disney.com, and when you visit the parks or take a Disney cruise, cardholders are privy to special savings on dining and souvenirs and get access to special character events.

American Express Serve Cash Back Card

This prepaid debit card from American Express rewards you with 1% cash back on all of your purchases. There are no fees, no minimum balance and no limit as to how much you can earn.

Axos Bank Rewards Checking

Formerly known as Bank of Internet USA, Axos Bank offers a Cash Back Checking account with up to 1% cash back on all signature-based purchases. There are no monthly fees nor minimum balance requirements; however, you will earn less (0.50%) if your balance falls below $1,500.

Delta SkyMiles World Debit Card

For those who like to travel, this SunTrust Delta SkyMiles World Debit Card may give you wings. You get 5,000 miles for your first purchase, then 1 mile for every $2 spent, up to 4,000 miles each month. Your miles never expire, and they can be used for travel and travel-related things, like seat upgrades and membership to the Delta Sky Club.

Redneck Rewards Checkin’ Account

This bank may have some quirky advertising, but it also offers a pretty serious rewards checking account. You need $500 to open an account, but once you do, you earn 3.00% on up to $10,000 (Note: This rate is subject to change). Any amount you spend over that, you earn 0.50%. You’re required to make at least 10 transactions each month to reap the rewards and need to open the account with at least $500, but there are no monthly service fees and no monthly minimum to maintain it.

Consumers Credit Union Free Rewards Checking

This Free Rewards Checking Account from Consumers Credit Union offers three levels of rewards, ranging from 3.09% to 5.09% in interest on balances up to $10,000, depending on which requirements you meet.

To qualify for the lowest tier of rewards, you must make 12 debit card transactions each month that add up to at least $100, and at least $500 in direct deposits or ACH credits must post to your account each month. Once your balance surpasses $10,000, the interest for all tiers drops to 5.09% for balances between $10,000.01 and $25,000 and to 0.10% for balances above that. There are no maintenance fees nor minimum balances required.

The final word on debit card rewards programs

If you qualify for a solid debit card rewards program, there’s usually no harm in enrolling, and you just might earn some great rewards along the way. But keep in mind that the rewards may not always be all that rewarding, and patience is required.