Cash back credit cards often get the spotlight, but plenty of people prefer to stick with their debit card. According to an annual tracker by S&P Global Market Intelligence, debit now surpasses credit as consumers’ preferred payment card, with 56.2% of consumers preferring debit as their primary payment card as of 2022.
Along those same lines, research by Valuedynamx found that 83% of respondents have at least one debit card (that number is 87% among respondents ages 18 to 34, who are more likely than other ages to have more than one debit card). Additionally, cash back was cited as the most desired cardholder benefit, with 50% of cardholders ranking it as No. 1.
What you may not realize is that you don’t have to choose between swiping your debit card or earning cash back rewards on purchases. Although not nearly as common as cash back credit cards, cash back debit cards also exist. Here’s what you need to know about using one.
[Read: Best Checking Accounts.]
What Are Cash Back Debit Cards?
Unlike traditional debit cards, which simply deduct the cost of a purchase from the user’s checking account when swiped, cash back debit cards provide the added benefit of earning a percentage of the purchase price back.
The cash back rate you earn will depend on the specific card and the type of purchase. For example, some cards may offer a flat cash back rate on all purchases, usually around 1% to 2%. Other cards might offer a higher cash back rate for specific spending categories, such as groceries, dining or gas.
The cash back you earn can then be redeemed in a number of ways. It’s common to have cash back rewards automatically credited to your account balance each month, although some cards allow you to redeem cash back for gift cards or merchandise as well.
Are Cash Back Debit Cards Worth It?
Cash back debit cards can definitely be worth it for some people. If you usually rely on a debit card for daily transactions and are disciplined with your spending, a cash back debit card can be a great tool for earning rewards without the temptation to accrue debt.
“Cash back shouldn’t be an incentive to spend too much,” says Ram Subramanian, vice president of deposits at Discover. “Instead, it would be best if you looked at cash back as a bonus reward or bonus cash for the money you’d spend anyway.”
However, it’s important to consider any fees associated with the card and ensure the rewards outweigh any added costs. “Customers should look for a cash back debit account that doesn’t sacrifice other features or have other fees in the name of cash back,” Subramanian says. Additionally, if building credit is a priority, you might find more value in using a rewards credit card responsibly.
[Related:Best Bank Account Bonuses]
The Best Debit Rewards Cards
If you’re interested in using a cash back debit card, there are several choices available. However, not all options on the market today are created equal. The following debit cards stand out for their lucrative rewards and lack of fees, making them top picks.
Discover Cashback Debit Card
Discover Bank’s online checking account comes with several perks, including the ability to earn cash back. Account holders earn 1% cash back on up to $3,000 in debit card purchases each month. There is no minimum balance required and no fees associated with the account.
Axos Bank CashBack Checking Debit Card
This debit card from Axos allows you to earn up to 1% cash back on signature-based transactions. This typically means that for the transaction to qualify for cash back, you must select “credit” instead of “debit” at the point of sale and sign for your purchase rather than entering your PIN. There are no monthly maintenance fees and Axos offers unlimited reimbursement for domestic ATM fees.
Upgrade Rewards Checking Plus
The Rewards Checking Plus account from Upgrade is an online checking account with no monthly fees and up to 2% cash back on purchases. To maximize your rewards, you can set up an active account with a monthly direct deposit of at least $1,000. This allows you to earn up to 2% cash back on debit card purchases (with a maximum of $500 in 2% rewards per calendar year) and unlimited 1% cash back on all other eligible debit card purchases.
Truist Delta SkyMiles Business Debit Card
The Truist Delta SkyMiles Business Debit Card offers a way for businesses to earn travel rewards on their everyday spending. It’s available to those with a Truist Dynamic Business Checking account. Account holders earn 1 mile for every $2 spent on qualifying purchases, up to 2,000 miles per card monthly, plus additional miles for direct Delta purchases. New customers also earn 5,000 bonus miles after making their first qualifying transaction. Points can be redeemed for travel, seat upgrades, Delta Sky Club memberships and more.
Pros and Cons of Using Debit Cards for Rewards
Although rewards debit cards come with several benefits, there are some drawbacks to consider, too.
Pros
— Earn rewards on spending. If you regularly use a debit card for daily transactions, a cash back debit card can offer you the added benefit of earning a percentage of your spending back. This can add up over time, especially if you use the card for significant monthly expenses. “Cash back offers can also be tailored for consumers based on their shopping behavior, with customized reward categories that align with their spending habits, such as groceries, dining or fuel,” says Kelli Hobbs, a card loyalty and rewards expert with Valuedynamx.
— Avoid debt. Unlike credit cards, debit cards use money directly from your checking account, so you’re not borrowing money and won’t face interest charges. “Many consumers are cautious about incurring credit card debt and are seeking alternative payment options, so it makes sense why they are increasingly turning to debit cards,” Hobbs says.
— Control spending. For those who find it easier to manage their spending by using a debit card, a cash back debit card can offer the dual benefits of budget control and rewards.
Cons
— Lower rewards rate. Cash back rates on debit cards are generally lower than those offered by rewards credit cards. If you have the discipline to pay off a credit card balance in full each month, a credit card may offer better cash back earnings.
— Fees and requirements. Some cash back debit cards come with monthly fees, minimum balance requirements or specific spending requirements to qualify for rewards. These fees can offset the benefits of any cash back earned.
— Limited protection and benefits. Credit cards often come with additional benefits such as fraud protection, warranty extensions and travel insurance. Debit cards, on the other hand, usually offer less in the way of additional perks and protections. Plus, using a debit card (even one that offers cash back) doesn’t impact your credit score, so your score won’t benefit from using a debit card to cover expenses.
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Best Debit Card Rewards Programs originally appeared on usnews.com
Update 02/26/24: This story was previously published at an earlier date and has been updated with new information.
