Understanding Rewards Debit Cards: Are They Worth It?

Debit cards are a staple in our financial lives, providing a convenient way to access funds directly from our checking accounts. While credit cards are often celebrated for their rewards programs, some debit cards also offer enticing rewards. But are these rewards debit cards worth it? Let’s dive into the details to help you make an informed decision.

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 come in various forms, such as cash back or points that can be redeemed for travel, merchandise, and more. Each program has its own terms and conditions, including rewards rates, 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 adhere to specific rules, such as maintaining a minimum daily balance in your account.

Which Debit Card Transactions Earn Rewards?

When you open a rewards checking account, it’s crucial to review the program’s terms and conditions to understand which transactions qualify for rewards. Typically, these include:

• Signature-based transactions: These involve signing the sales receipt at an online or in-store checkout. Some terminals may require you to select the “credit” option first, then provide the debit card and sign the receipt.
• PIN-based purchases: These can occur online or in-store. You’ll swipe or insert the debit card (or enter the details) and then input your unique PIN.

However, not all transactions may earn rewards. Common exclusions include:

• Online subscription payments
• ATM transactions
• Peer-to-peer payment app transfers
• Purchases you return
• Illegal purchases
• Online sports betting and internet gambling transactions
• Purchases of currency, cash, and cash equivalents, like gift cards
• Loan payments

What Types of Rewards Can Your Debit Card Earn?

Rewards programs vary, 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 a flat amount, such as 5 cents, for each debit card transaction.
• Points: Some programs give you points for every dollar you spend on qualifying purchases. These points can be redeemed for cash, travel, gift cards, and more.
• Discounts: You may 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 tally up your eligible rewards. Cash is typically deposited into your checking account, while points may need to be spent in a special shopping portal.

Are Rewards Debit Cards Worth It?

Rewards debit cards can be a worthwhile option if you can meet the program’s requirements, such as maintaining a minimum balance in your account. It’s also essential to ensure the account either has no fee or allows you to earn enough rewards to offset any fees. 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.

Consider how often you use your checking account and whether your typical transactions will qualify for 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 of using a rewards debit card 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 other perks, such as ATM fee reimbursements, identity theft recovery services, cash back on your checking account balance, and programs that give you 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 specific requirements, such as maintaining a minimum monthly balance. Falling short one month could mean missing out on rewards or earning a lower rate.
• Monthly fees: Some banks and credit unions charge a monthly fee for 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 lead to overspending. Additionally, you might miss out on potentially higher rewards by using a credit card instead.

The Bottom Line

Debit card rewards programs offer a way to earn cash back or points on your 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 it’s essential to 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. This account can help you build credit without debt by linking to Experian Boost®, which gives you credit for eligible bill payments after three months of payments. You’ll also pay no monthly fees, have access to over 55,000 fee-free ATMs worldwide, and could receive your paychecks up to two days early with direct deposit.

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