Advertisement
credit & debt

Debit Cards: Less Rewarding

With interest rates near zero, banks are using debit-card rewards programs to entice new customers and retain current ones.

With interest rates near zero, banks are using debit-card rewards programs to entice new customers and retain current ones. Twelve of 14 large banks followed by Corporate Insight, a financial-services research firm, offer at least one rewards program.

But debit-card rewards are less generous than the rewards credit cards offer. For one thing, just over half of the debit cards you can select with a rewards checking account charge an annual fee, which can be as high as $65. And the Corporate Insight survey found that it's common to earn only one mile for every $2 spent with your travel rewards debit card, instead of the usual one mile per $1 spent with a credit card. With many programs, you have to spend $25,000 to earn $50. (One standout is the U.S. Bank FlexPerks Travel Rewards Check Card, which offers a $50 rebate when you spend $5,000. See www.usbank.com.)

Advertisement - Article continues below

And you may not even get the rewards points if you enter a PIN instead of signing for purchases because entering a PIN generates lower merchant fees for banks. KeyBank uses a carrot and a stick to get you to avoid punching in the PIN: It offers two points for every $1 you spend when you sign, versus one point for every $6 you spend on PIN purchases.

Advertisement
Advertisement - Article continues below

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, debit cards may be more rewarding to consumers (see 6 Ways Financial Reform Will Change Your Personal Finances). The law permits retailers to offer discounts for cash or debit-card transactions, and retailers may set a minimum, up to $10, to use a credit card. The act also requires the Federal Reserve to issue regulations on the fees that merchants pay to issuing banks to ensure that those fees are "reasonable and proportional" to the banks' costs (small banks and credit unions are exempt). Merchants will be able to choose between at least two competing networks to process each transaction, which could drive down merchants' costs. Whether they pass the savings on to consumers remains to be seen.

Advertisement

Most Popular

65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020
52 Super Deals and Discounts for 2020
spending

52 Super Deals and Discounts for 2020

With a special nod to those of you spending more time at home, we found dozens of deals and discounts, plus ways to save (or make) money.
June 6, 2020
Banks Canceling Credit Cards, Cutting Limits
credit & debt

Banks Canceling Credit Cards, Cutting Limits

If you haven’t used a card in awhile, make a small purchase with it to keep it open. It’s good for your credit score.
June 4, 2020
Milliennials Face Their Second Recession
credit & debt

Milliennials Face Their Second Recession

Forty percent of millennials say the pandemic will likely cause them to delay payments on their debts. Does that include you? Time to take action.
June 4, 2020