A debit card works like a credit card. You can swipe to make a purchase and don’t need cash. The key difference between a debit card and a credit card is where the money comes from.  When you purchase with your debit card the money is withdrawn right from your checking account. It prevents you from buying and making purchases you don’t have the money for so overdrafts are prevented unless your bank has an overdraft policy that you participate in.

When you open a credit card, you are given a line of credit. So, when you make a credit card purchase, the financial institution applies your purchase amount towards your line of credit. That becomes part of the balance that you owe. They also charge you interest on that balance. In essence, you are borrowing the money and paying it back with payments and interest.  As credit cards became widely used the competition between banks increased. Banks started offering rewards and cash back options for using their credit card. Now, as more and more people are making debit card purchases, banks are offering incentives to open a checking account so you can use their debit card.  Those rewards, though, are rarely as good as you would get with a credit card. Yet, they do exist if you do your research.

Debit cards can offer rewards in several ways. Because there are fewer debit cards with rewards programs, it’s good to understand how you might get a reward. There are three ways you might earn a reward from your debit card.

Cash Back Rewards

Cash back reward cards do exist but not as many as there once were and the rewards are slimmer. The biggest reason for this is simple. The banks have less money to create those rewards.  During the financial crisis around 2008, there were many restrictions placed on the number of fees that could be charged for using a debit card. This was one of the ways banks made money to fund those rewards programs.

Reward Points

Rewards points work much the same way airline points work. You spend money using your debit reward card. For every certain amount you spend, you earn a rewards point. Those points add up and you can spend the rewards.
It should be noted you don’t get cash back from the points but instead can use them towards purchases you might also use cash for. So, in the end, you still save money on future purchases just by using the rewards debit card.

Relationship Rewards

Relationship rewards are another way banks can reward you for using their debit card. Your card issuers, bank or credit union, have connected with other businesses and set up perks like discounts you might get because you use their debit card. Perk discounts come from certain stores, websites or business partners.  You won’t get cash back, yet you are still saving money if you choose to use your debit card and take advantage of those rewards from those partnerships.

Knowing the ways you can gain cash back or rewards will help to know what kind of questions to ask regarding the debit card program.

You should ask:

• What form of rewards do you offer?
• How can you earn rewards?
• How quickly do they add up?
• Do the rewards expire?
• Is there a limit to the number of rewards you can earn during a certain period?
• If you offer cash back, is there a maximum amount that can be earned?

Another thing to consider is if the reward cards have fees. Will the way you use the card give you more rewards than the amount of fees you pay?