Editorial Policy

Rewards Debit Cards Getting Harder to Find

Eva Norlyk Smith Ph.D.

June 25, 2012

QHi Eva,

I bank with Wells Fargo, and it is ending its debit card rewards program. I just cashed in the last of my points for some gift cards. I’d like to find out how to get another rewards debit card somewhere else.  Are there any out there? I really don’t want to get a credit card, but I like getting rewards. Do I have any options? — Charlie

ADear Charlie,

Well, unfortunately, rewards debit cards may be a dying breed. Wells Fargo is following in the footsteps of a long list of banks that have ended their debit card rewards programs. Bank of America recently closed its popular U.S. Airways debit rewards program, Citi closed its AAdvantage debit card, Chase has discontinued its Ultimate Rewards debit card, and the list goes on and on.Ask Eva

Banks are blaming the recent restrictions on debit card interchange fees or, “swipe fees,” which have made debit card transactions less profitable for banks. Whatever the reason, the reality for consumers is that choices for debit rewards cards have been narrowing over the past year.

At this point, debit rewards cards offered by national banks are hard to come by. The remaining player on the national scene is the PerkStreet Financial Platinum Debit MasterCard. The card offers decent rewards, particularly if you bother reading the fine print.

Cardholders earn 1 percent cash back on non-PIN transactions and 2 percent cash back on online purchases with major online vendors such as Amazon, iTunes, Target, Apple, Best Buy and Walmart. If you keep a $5,000 balance in your checking account, you will earn that 2 percent cash-back rate offline as well at Walmart, Target, Best Buy and Apple stores. Finally, if you stay on your toes, you can get 5 percent cash back in rotating categories of vendors, which change each month.

When it comes to redeeming points, however, things get a little dicey. You’ll get the full value of rewards earnings if you redeem rewards at participating retailers like Target, Amazon, Gap, Best Buy, Starbucks, Sears, iTunes and so on. Opt for cash back in the form of an account credit on your checking account, however, and you’ll have to sacrifice 2 perk dollars per $20 credit. In other words, you will have to spend $22 in perks to get $20 in cash credited to your account.

For a recent list of debit rewards cards, check out Bankrate’s 2011 Debit Rewards Cards survey. You may also have luck finding a debit rewards card offered by a bank or credit union in your local area, so do a Google search on “debit rewards card” and the name of your town.

When you do your research, here are a few things to check for:

  • Is there an annual fee? If there is an annual membership fee, your net rewards earnings may not be worth it.
  • What are the points earnings? In many rewards programs, 1 reward point is worth 1 cent. If the card offers only 1 point for every $2 spent, that’s the equivalent of a 0.5 percent cash-back rate – a poor value for your spending.
  • What are the redemption options? Do you have to redeem with certain retailers to get the full redemption value? And if so, ask yourself if this is an extra step that makes you more likely to forget about redeeming rewards earnings.
  • Is it simple? Some programs offered as debit rewards program are poorly disguised marketing programs for store specials and coupon offers. If it’s hard to figure out the terms, chances are it’s not a card program you’ll be interested in.

Unfortunately, no matter how hard you look, you won’t find a debit card rewards program that approximates the cash-back value you can get with  cash-back credit cards. If you’re wary of credit, a simple way to turn a credit card into a debit card is to just pay the balance in full — you can even pay down the balance every two weeks or even weekly, if you prefer.

But I hear you, debit cards are indeed much simpler to manage. So if it’s just a few extra perks you’re looking for, it’s worth your while to do a little digging to find the best debit rewards programs still out there. Good luck!

Got a question for Eva? Send her an email.