As credit card issuers face a more competitive marketplace, banks are expanding offers and incentives in the debit card arena. Now, several debit cards are poised to offer rewards to users, including cash back.
Many experts tout using a credit card rather than a debit card because it offers better protection against fraud and can give the cardholder access to comprehensive rewards programs. In general, debit cards can’t compete with these perks.
As credit card issuers face a more competitive marketplace, banks are expanding offers and incentives in the debit card arena. Debit cards, which draw money directly out of a checking account, are now poised to offer rewards to users, including points, price discounts and cash back.
A cash back debit card may be a great option for consumers with poor credit or limited credit card choices.
How do cash back debit cards differ from rewards credit cards?
Cash back debit cards differ from typical cash back credit cards. Debit cards draw from money you already have in a bank account, while credit cards provide a revolving credit line where you must make payments. Credit cards let you spend up to a credit limit and carry a balance month to month (typically with interest), while debit spending will be limited to what you have in your bank account.
In addition, different cards offer varying rewards-earning structures. With credit card programs, you have more redemption flexibility. Most rewards cards offer several different ways you can redeem cash or travel rewards. Debit cards with rewards are typically more limited, notably with lower caps on reward-earning potential.
A credit card usually offers better rewards and can help you build your credit. Additionally, credit cards typically offer more protection against fraud and can offer extra perks, such as purchase protection or extended warranties.
However, some cardholders may be tempted to spend more than they can afford when using a credit card. These cardholders will typically rack up interest on top of the charges they don’t pay off right away along with overspending. Debit cards have built-in protection against overspending because you can’t spend more than you have in the connected account.
Best debit cards with rewards
For consumers with limited credit card choices, a viable option is a debit card. You have several great options to consider. Here are four debit cards that are standouts for cash back and miles benefits.
Discover Cashback Debit
With the Discover Cashback Debit card, users can earn up to $30 cash back per month, thanks to a rate of 1% back on a maximum of $3,000 in purchases per month.
Discover does not require a minimum deposit to open your Discover checking account, but cardholders must make a deposit into their accounts within 45 days from the opening date.
Rewards don’t expire as long as the account is open and in good standing with Discover. This card’s redemption options include an auto-deposit to a savings account or a credit in the checking, savings or money market account you hold with Discover.
You’ll also have access to more than 60,000 no-fee ATMs.
SunTrust Bank Delta SkyMiles World Debit Card
For travelers who favor Delta Air Lines and its SkyMiles program, the SunTrust Bank Delta SkyMiles World Debit Card offers additional opportunities to earn miles. This debit card awards you with 5,000 bonus miles after your first signature-based or PIN-based purchase and up to 1 mile per dollar on all future PIN- or signature-based purchases.
Your earnings rate depends on your connected account. For a SunTrust Advantage Checking account, cardholders accrue 1 mile for every $2 spent on eligible purchases. For a SunTrust Exclusive Checking or Signature Advantage Checking account, the earning rate is 1 mile per dollar.
A few caveats to keep in mind with this debit card: It caps your rewards at 4,000 miles per month, and it has an annual fee of up to $95, which may be discounted based on your relationship with SunTrust Bank.
Also, note that a SkyMiles World Debit Card is available only to Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and Washington, D.C., residents.
American Express Serve Cash Back
The American Express Serve card is slightly different from others on this list, as it’s a prepaid debit card. Essentially, funds are not tied to a checking account; rather, the consumer loads funds onto the card, and spending is deducted from that preloaded balance.
Cardholders can earn an unlimited 1% back on all their purchases, but the card has a $7.95 monthly fee. Additionally, you’ll pay a $3.95 fee to add more cash to the card.
You can earn cash back for both in-person and online purchases. Unlike some debit cards that may make you wait until the end of the month to access your earnings, this cash back prepaid card gives you access to your rewards immediately. To access your cash back rewards, log in to your online account portal or the mobile app.
Plus, Amex is known for superlative fraud protection, and this card doesn’t disappoint. American Express Serve cards offer purchase protection benefits typically seen only in credit cards. If an item you buy with the card is damaged or stolen for up to 120 days from the date of purchase, Amex may reimburse you up to $1,000 per incident.
PayPal Debit Business Mastercard
PayPal’s Business Debit Mastercard lets you spend the money you have with PayPal. Cardholders can earn unlimited 1% cash back on eligible purchases, including any made from a linked bank account, which is a unique benefit. This card also charges no annual fee.
This card from PayPal also offers the superior benefits that come with any Mastercard, including worldwide acceptance and ATMs, online account management and protection with zero fraud liability.
Should you get a cash back debit card?
Consider your situation and goals. Are you a reward-seeker with no credit history or a poor credit score? It can be challenging to get approved for an unsecured credit card that offers benefits like points, miles or cash back rewards, especially with thin or damaged credit. By opting for a cash back debit card, you can still earn rewards on your spending.
Additionally, if you have a penchant for overspending, a cash back debit card may be the perfect choice for you – offering rewards but also limiting your spending to what you can afford.