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Debit card rewards programs gaining acceptance

Just don't expect to rack up awards as quickly as with credit cards

By John Morell

Attention credit card rewards junkies: It's now possible to get your beloved miles and points through your debit card, but if you're expecting the same terms that you get with your credit card programs, you'll probably be disappointed.

Debit card rewards programs are typically skimpier than their credit card counterparts -- for example, offering one mile for every $2 or $4 spent instead of the standard one-for-$1 ratio -- and there's often an annual fee of $25 or more. Still, while they're not likely to make you rich or a world traveler, you can make them work for you.

Debit card reward

"It's all about keeping you as a customer and getting you to use their products," says Joe Ridout, a spokesman for Consumer Action in San Francisco. "What you have to ask yourself is, 'Do I really need them?'"

Banks hope you'll decide that you do. They see these programs (see chart below) as a way to make more money off of the cards, which generate much less money in fees for banks than do credit cards.

Most programs are contingent on you using the "signature" option of your card -- meaning the card is swiped, you sign for the purchase and the transaction is run through the merchant's Visa or MasterCard processing system -- rather than punching in a PIN code. "The bank picks up an interchange fee for that transaction from the merchant, which would be less if you paid with the debit option using your PIN," says Ridout. The bank then uses those fees to offset the cost of the rewards program, since, unlike with credit cards, banks don't make any money off interest on debit cards. And since the bank isn't making as much money, they're going to much more stingy about giving it away to you in the form of rewards.

"Of course, the rewards from a credit card program are going to be greater since the bank that owns it is making plenty of money off of interest charges," says Ridout. "Most people don't pay off their credit card balance each month, so they're paying quite a bit for those extra benefits."

Building a 'total relationship'
A typical credit card company's rewards program has a simple aim: Get the cardholder to keep buying with their card. With a debit card program, it's that and a little something more. They want to keep you as a customer, but they also want to hook you into the bank's other services. It's called bundling or -- as it's known in industry-speak -- "total relationship banking."
5 debit card rewards tips

1. Many debit card programs charge an annual fee; others are free. Not sure if a program's worth the price? Call and ask the bank if they'll waive it the first year for a good customer.

2. If you'd like a card that earns airline miles, and you're already saving miles on a particular carrier, you may have to switch banks to keep focused on that dream vacation. Check to see if opening a credit card account or other relationships with the bank increases your miles.

3. Programs that pay you a reward for using them are great, but make sure you know when you're being paid. Some pay off a reward once a month. Others pay annually.

4. Check out how long your rewards points stick around before they expire. Try to save for something in particular to stay aware of them. If you forget you have points somewhere, there's a good chance you'll miss the expiration date.

5. Don't see any rewards you like? Some programs have "concierges" who can help you design a custom award to shoot for.

"In short, the more accounts you have with the bank, the better your rewards package," says Kelly Hlavinka, managing partner for Colloquy, a Milford, Ohio, consulting firm that studies loyalty programs. "They're seeing that if you get hooked on collecting points, this is a way to draw you into their other services."

At Citi, for instance, the Thank You Network works by giving you points each month that can be redeemed for travel or merchandise. The amount of points you receive depends on the types of accounts you have -- from 25 points for a simple checking account to 300 for a CitiGold account with all of the bells and whistles. In addition, Citi gives you a point for every $2 charged on your debit as a signature and one point for every $3 when you use a PIN transaction.

National City Bank has featured a rewards program that upgrades a customer's points according to whether he or she has items such as a National City credit card or home equity loan through the bank. They also have a handy calculator on its website showing how many points you can earn per transaction or per month when you buy certain categories of items. However, with PNC Bank's recent purchase of National City, it's unknown how its debit cards rewards program will fare, especially since PNC's own program pales next to National City's.

So, given the current upheaval in the financial services industry, what is likely to happen to the rewards you've earned if your bank gets eaten by another entity or is closed altogether? "Like any other credit card or airline rewards program, it's subject to change without notice," says Ridout. "They made the program. They can change the rules at any time. That's why it's good to read those fine-print notices you get from the bank to see how it affects your use of their services."

Not just for the big boys
It's not just the big banks getting into the debit card reward business. Small banks and credit unions are also in the mix, although they usually have some help. "They don't have the infrastructure that a large bank would have so they bring in a program like Visa Extras," says Hlavinka. "This is a rewards program operated by Visa, not the bank, but it allows them to compete with the bigger institutions."

It's all about keeping you as a customer and getting you to use their products. What you have to ask yourself is "Do I really need them?"

-- Joe Ridout, spokesman
Consumer Action    

Banks are also getting creative about their rewards. Bank of America's "Keep the Change" program has picked up on a growing desire to save more money, which, of course, benefits the company. They deposit the amount it takes to round a transaction out to a whole dollar into a savings account for you.

For instance, if you buy a cup of coffee for $3.51 with your debit card, $4 is charged to your account and 49 cents is sent to your savings. And, for the first three months of the program, they'll match the savings 100 percent, and 5 percent thereafter up to a total of $250 per year. "There are customers who really work to make small purchases so they can hit the matching amount," says Ridout. "It's not a lot, but you can't scoff at free money nowadays."

With an eye toward environmental concerns, Citizens Bank pays customers in its Greensense program 10 cents for each debit or online transaction that doesn't involve the use of paper. Members can earn up to $120 per year, and they also receive a debit card made of recycled plastic.

Other banks are looking to so-called merchant-funded programs, which cost them little. "Basically, the bank pairs up with retailers, and instead of points, you might earn a discount at a particular store over a weekend using your debit card," says David Robertson, publisher of The Nilson Report, a credit card industry newsletter. "Ultimately, this is probably where debit reward programs are heading, since they're not going to compete with credit card programs on points, and it's the merchant, not the bank, that's giving the reward."

Overall, before signing up for a program, take a realistic look at your debit card spending to see if the rewards are worth the possible costs. You can also use the chart to compare the programs offered by the nation's top debit card issuers.

Bank and program name

Annual fee

Program description

Examples of rewards

Bank of America Keep the Change Savings Program

$0

For every debit card purchase, the program rounds off the change to the next dollar and puts it, plus a matching fund, in your savings account.

Up to $250 in matching funds each year put in your savings account.

Chase Leisure Rewards

$25

Earn 2,500 points just for signing up and then four points per dollar. All can be redeemed for travel and merchandise. 

An astronaut training experience, complete with a no-gravity flight, for 120,000 points.

Citi Thank You Network

$0

Earn points each month based on the type of account you have and get one point for every $2 in debit purchases and one point for every $3 in PIN transactions.

A 37-foot Sea Ray Sundancer yacht with flat-screen TV and wet bar for 40,981,400 points.

Wells Fargo Exclusive Rewards

$12-$19

Earn four points per dollar on the debit card while also earning one point per dollar by using the bank’s credit card.

A portable solar-powered charger for cell phones or mp3 players for 6,500 points.

Regions Bank CheckCard Rewards

$0

Earn up to 30 percent cash back when using your card at a wide variety of retailers, both online and at the store.    

Up to 28 percent cash back when you use your check card at MovieTickets.com.

Comerica Bank WorldPerks Check Card

$20-$55

With an $55 annual fee, get one mile per dollar. With an $20 annual fee, get one mile for every $2. The miles can be used on a variety of airlines.

A 1,000-mile bonus just for opening an account.

Charter One Rewards

$0-$25

Earn one point for every $1 spent and up to 10 points per dollar when you shop at retailers in the bank’s merchant network.

A quarter-point rate reduction on a Charter One Bank home-equity loan or line of credit for 25,000 points.

SunTrust Rewards

$0

Earn one point for every $4 spent and one point for every $1 spent with the bank’s credit card.

For 5,000 points, you get $50 to donate to charity and a matching $25 from SunTrust.

U.S. Bank Checking That Pays Program

$0-$55

A variety of rewards programs are available, from airline mileage to cash back to cards that donate to specific charities.

Up to 25 percent cash back when you make new debit card purchases.

Fifth Third Bank Rewards

$0

Administered by MasterCard, this program gives you one point for every $3 spent.

A $100 contribution to your 529 college savings plan for 10,000 points.

USAA Federal Bank Debit MasterCard Monthly Bonus Sweepstakes

$0

Through the end of January, each time you use your debit card, you get an entry in a drawing for $1,000 per month paid over 10 years.

Each month, another drawing offers debit card users a chance to win a one-time prize of $10,000

Citizens Bank Rewards

$0-$25

Earn one point per $1 charged plus double points on some online transactions. Also, Citizens’ Green Sense program -- a free service that pays you 10 cents for each debit or online transaction you do.

Sanyo 5 megapixel digital camera for between 30,000 and 40,000 points

See related:  Debit vs. credit: Which offers more protection?, 5 secrets to smart debit card use, Consumer rights for credit and debit cards, Be smart about debit card use

Published: November 13, 2008


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Updated: 07-24-2014

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Low Interest 10.37%
Balance Transfer 12.64%
Business 12.80%
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Reward 15.00%
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