How Do Rewards Debit Cards Work?

Quick Answer

A rewards debit card is usually linked to your checking account, and you earn cash back or points every time you make a qualifying purchase.

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Debit cards aren't typically known for their rewards, but some will give you points or cash back when you make eligible purchases. These debit card rewards programs can be an easy way to earn quick cash, but it's a good idea to understand the rules for the program before signing up. Here's how debit card rewards work.

What Is a Rewards Debit Card?

A rewards debit card is a card that's linked to your checking account and helps you earn rewards based on your purchases. Rewards may come in the form of cash or points that can be redeemed for travel purchases, merchandise and more. Every program is different, so they all come with their own terms and conditions, rewards rates, rules on qualifying transactions and maximum earning potential.

For instance, a rewards debit card may pay 1% cash back on up to $3,000 in purchases you make. To stay eligible for those rewards, you may need to follow rules like maintaining a minimum daily balance.

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Which Debit Card Transactions Earn Rewards?

When you open a rewards checking account, look over the program's terms and conditions to see which transactions qualify for rewards. These usually include:

  • Signature-based transactions: This type of transaction involves signing the sales receipt at an online or in-store checkout. Some terminals require you to select the "credit" option first and then provide the debit card and sign the receipt.
  • PIN-based purchases: A PIN transaction can also be available online or in a store. You'll swipe or insert the debit card (or type in the details) and then enter your unique PIN.

Depending on the debit card rewards program, you might not earn rewards on certain transactions. These often include:

  • Online subscription payments
  • ATM transactions
  • Peer-to-peer payment app transfers
  • Purchases you wind up returning
  • 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?

Each program is different, but they often come with 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 the bank may pay you a flat amount, such as 5 cents, for each debit card transaction.
  • Points: Some programs give you points for every dollar you spend on each qualifying debit card purchase. You may be able to redeem those points for things like cash in your account, travel purchases and gift cards.
  • Discounts: You may also 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 add up all of your eligible rewards. Cash is typically deposited into your checking account, while you may need to spend your points in a special shopping portal.

Are Rewards Debit Cards Worth It?

Debit card rewards programs may be a worthwhile option if you can meet the requirements of the program, such as keeping a minimum balance in your account. You'll also need to make sure the account either comes with no fee or allows you to earn enough rewards to outweigh the fee. If you use the rewards debit card for purchases you were going to make anyway, then you won't risk overspending just to earn a little bit of cash back.

Also consider how often you use your checking account and whether your normal transactions will qualify for the 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.

Review the pros and cons of a rewards debit card before signing up for one of these accounts.

Pros of Debit Card Rewards

  • Rewards: The main benefit of using a rewards debit card is the potential to earn points or cash back—typically on purchases you were planning to make either way.
  • Extra features: Checking accounts that come with rewards debit cards may also come with other perks, like ATM fee reimbursements, identity theft recovery services, cash back on your checking account balance and programs that give you upcoming direct deposits two days early.

Cons of Debit Card Rewards

  • 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 your rewards, you may need to meet eligibility requirements like maintaining a minimum monthly checking account balance. If you come up short one month, you may not earn rewards or you may earn a lower rewards rate.
  • Monthly fees: Some banks and credit unions charge a monthly fee to use your checking account. That fee will eat into your cash back earnings or potentially negate them altogether.
  • Risk of spending more: If you have to spend a lot to earn the maximum cash reward, it may cause you to spend more than you budgeted just to earn rewards. You'll also miss out on earning potentially higher rewards by using a credit card.

The Bottom Line

Debit card rewards programs offer a way to earn cash back or points on the purchases you make with the card. Many of the checking accounts that offer rewards programs also come with special tools and features to make money management easier. But because these programs may set eligibility requirements or charge monthly fees, you'll need to consider whether the program is right for you.

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