Dear Clever Credit,
I’m seeing more and more debit cards popping up that offer rewards. Are they better than credit cards? Because if I can earn the same rewards without dinging my credit, should I apply for one?
Signed,
Debit vs. Credit
Dear DvC,
I’ve seen these cards popping up, too. There are quite a few out there that earn cash back, points or miles. Southwest Airlines, United Airlines and Wyndham Hotels & Resorts launched rewards-earning debit cards just last year.
But a lot of these debit cards come with fees or don’t earn as much as their credit card counterparts. Let’s take a look at Southwest since I called them out. Now, Southwest isn’t a bank, so its debit card is powered by Sunrise Banks, N.A., and your funds are insured up to $250,000.
They have three personal credit cards, all with varying annual fees and corresponding benefits — the Southwest Rapid Rewards® Plus Credit Card, the Southwest Rapid Rewards® Premier Credit Card and the Southwest Rapid Rewards® Priority Credit Card. The debit and credit cards all earn bonus points every calendar year toward a Companion Pass, but the amount varies by card. Just for comparison purposes, though, let’s look at rewards rates and annual fee only.
| Southwest Rapid Rewards Debit Card | Southwest Rapid Rewards® Plus Credit Card | |
| Annual or Monthly Fees | $6.99 per month (roughly $84 per year), waived if you have a minimum monthly balance of $2,500 | $99 per year |
| Rewards |
— One point per $1 spent on eligible Southwest Airlines purchases, on qualifying dining purchases, and on subscriptions, including utilities and streaming services — One point per $2 spent on all other purchases |
— Two points per $1 spent on eligible Southwest Airlines purchases — Two points per $1 spent at gas stations and grocery stores (up to $5,000 in combined purchases per anniversary year) — One point per $1 spent on all other purchases |
So for just $15 more a year, you earn more rewards with the lowest-tiered Southwest credit card.
[Read: Credit Cards With No Annual Fee]
Another 1:1 comparison is the United MileagePlus Debit Rewards Card and the United? Explorer Card. Each has an annual or monthly fee, but both have options to waive. And while the United credit card is $102 more expensive than its debit card counterpart, you can’t deny those rewards have a lot of earning potential.
| United MileagePlus Debit Rewards Card | United? Explorer Card | |
| Annual or Monthly Fees | $4 per month ($48 per year), waived if you have a minimum monthly balance of $2,000 | $0 intro annual fee for the first year, then $150 |
| Rewards |
— 1 mile per $1 spent on United purchases — 1 mile per $2 spent on all other qualifying purchases |
— 2 miles per $1 spent on on United purchases, dining, and on hotel stays booked directly with the hotel — 1 mile per $1 spent on all other purchases |
[Read: Airline Credit Cards]
Let’s take a look at other travel cards. If we compare the Wyndham Rewards Debit Card with a top travel credit card like the Chase Sapphire Preferred® Card, for example, the winner is clear. (It’s the Chase Sapphire Preferred.)
| Wyndham Rewards Debit Card | Chase Sapphire Preferred® Card | |
| Annual or Monthly Fees | $6 per month (or $72 per year), waived if you have a minimum monthly balance of $2,500 | $95 per year |
| Rewards |
— One point per $1 spent on eligible purchases made at participating Hotels by Wyndham and qualifying gas and grocery purchases — One point per $2 spent on all other qualifying purchases |
— Five points per $1 spent on travel purchased through Chase Travel? — Three points per $1 spent on dining, select streaming services and online groceries — Two points per $1 spent on all other travel purchases — One point per $1 spent on all other purchases |
[Read: Travel Credit Cards]
Now, this isn’t to say all rewards debit cards aren’t as good as credit cards. Some are quite impressive.
For example, the PayPal Debit Card earns 5% cash back in monthly rotating categories (up to $1,000 a month), and it doesn’t come with an annual or monthly fee. Your categories include restaurants, apparel, fuel, groceries, and ride-hailing and public transit. It’s a good supplementary card so you can pair it with a credit card that also has rotating categories. That way you’re always earning in your top category.
So it really depends on your credit score, the type of card you’re looking at and if you plan to pair it with another card (either debit or credit) to maximize rewards.
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Are Rewards Debit Cards Worth It? Here’s How the Credit Card Versions Compare originally appeared on usnews.com
