Debit card reward programs: Be sure to read the fine print first

We here at Walletpop tend to write a lot about credit card rewards. The problem is, we also spend plenty of time warning you about the pitfalls of using those cards. So, what's a responsible person to do if they want to earn rewards but don't want to rack up a big balance every month? As it turns out, you're in luck: a growing number of banks and credit unions are rolling out reward programs for debit cards.

"This is a natural evolution of the reward card program," says John Ulzheimer, president of consumer education for Credit.com. "Banks would rather have people use debit cards than write checks." And many banks prefer debit card rewards programs since it's cheaper to process card transactions than paper checks.
Of course, banks and credit unions aren't offering these rewards just to be nice to their customers. "These rewards programs are largely designed to reward the issuer rather than the cardholder," Ulzheimer says. Many of them restrict qualifying purchases to those made when you sign for your purchase, for example. Banks and credit unions have to pay a lot more when you enter your personal identification number, or PIN, as opposed to when you sign for a debit card purchase.

This doesn't mean you shouldn't check these programs out, but make sure to evaluate all the terms and conditions rather than just focusing on the rewards. Bankrate.com published a round-up of the debit reward programs offered by big banks and credit unions around the country, which is a handy place to start.

Just keep in mind that since the bank isn't making as much money from the account (after all, you're not paying interest on your purchases like you would with a credit card purchase), the rewards offerings aren't as generous. While a 1% reward earnings rate is generally considered standard for credit card rewards, you shouldn't expect that kind of return from a debit card.

Wilmington Savings Fund Society Cash Rewards
is one of the few programs profiled by Bankrate that offers a straightforward cash back program and 1% cash back with no cap on reward earnings. Salem Five Cash-Back Debit Rewards offers a 0.5% cash back rewards rate. Rockland Trust Debit Card Reward uses a 1% cash-back formula, too, but there's a minimum qualifying receipt amount of $10 and an annual rewards cap of $300, so in reality, you probably won't earn the full 1%.

Some programs, such as the Disney Rewards Debit Card from Chase, offer a 0.5% cash-back rate - but there's a $25 annual fee and rewards can only be spent on Disney-related merchandise, park visits and the like. A few others, such as the Bank of America US Airways and Alaska Airlines Debit Cards, also have 0.5% redemption rates (Bank of America bumps it up to 1% for qualifying airline purchases).

Most of the debit rewards programs surveyed by Bankrate use a points system that lets you redeem for merchandise. This can make it tricky to figure out what you're getting, since the amount you'd pay in points often doesn't easily correlate with the retail price of the item. In other words, a one-point-per-dollar deal might not be all it's cracked up to be if the "price" for the reward is high.

Many of the cards carry annual fees, so be sure to read the fine print before signing up for a debit rewards program. What's more, Credit.com's Ulzheimer points out that using a debit card is riskier than using a credit card, since debit cards are linked directly to your account and don't offer the same level of fraud protection as credit cards. However, if you want a rewards debit card because you're cutting credit out of your life but still want some perks, this may be a solution for you.

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