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Debit rewards cards expand offerings -- and come with costs

Want a flat-screen TV or a nifty new DVD player? How about a roundtrip plane ticket to anywhere or a $50 gift certificate to your favorite shop or restaurant?

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If you think this is another credit-card come-on, think again.

To enjoy these oh-so-tempting rewards, you'll need to spend and spend and spend with a debit card.

A debit card yanks the payment from your checking account at the time of purchase. And several major banks have rolled out reward programs aimed squarely at their debit card customers.

As with credit cards, air miles continue to be a popular reward. Chase Manhattan, U.S. Bancorp, Citibank and Bank of America are among the banks that let customers earn air miles with debit card purchases.

Programs through Chase
Chase launched its Chase/Continental Airlines Banking Card back in 1999. Customers earn one OnePass mile for every $2 they spend on the card, which comes with a $30 annual fee.

Customers with a Chase Select checking account have the option of earning miles at a much faster rate: They earn one OnePass mile for every dollar they spend on their Chase debit card. But first they have to pay a $65 annual fee.

All Chase air mile reward customers earn miles on both PIN-based and signature-based debit card purchases. No miles are earned on ATM withdrawals or for receiving cash back from a grocer or another merchant.

Chase customers who don't like to fly can sign up for Leisure Rewards. With Leisure Rewards, Chase customers earn one point for every $1 spent with the card. The points can be redeemed for everything from cooking classes to spa visits. The Leisure Rewards program levies a $30 annual fee.

U.S. Bank programs
Minneapolis-based U.S. Bank launched its WorldPerks Check Card in conjunction with Northwest Airlines in March 2001. Customers earn one air mile for every $2 spent on the card, which comes with a $20 annual fee.

There's a small hitch. U.S. Bank customers only earn air miles on signature-based debit card purchases. PIN-based purchases don't count. So people that prefer to pay by punching in their personal identification numbers are out of luck.

U.S. Bank also offers a debit rewards program for Harley-Davidson motorcycle enthusiasts. Every $1 of signature purchases that you make with the card earns you one entry into a monthly drawing for a Harley-Davidson motorcycle.

Folks who prefer their rewards in cash can sign on for the Cash Bonus Visa Check Card from U.S. Bank. But they better be patient. With a cash rebate of one-quarter of 1 percent (.0025 percent) on signature purchases, you'll need to spend a whole lot of money on your card before you get much of a reward. Spending $500 on the card will earn you a cash rebate of just $1.25.

Citibank and Bank of America options
Over at Citibank, you can earn American Airline AAdvantage miles on all signature-based purchases made with the Citibank AAdvantage Debit Cards.

Customers who sign on for a basic card pay a $25 annual fee and earn one American Airline AAdvantage mile for every $2 in signature-based purchases made on the card. Premium card customers pay a $65 annual fee and earn one air mile for every $1 in signature-based purchases.

Bank of America offers separate air mile debit reward programs with US Airways, Alaska Airlines and America West.

Each of these rewards programs charges a $30 annual fee. You earn one air mile for every $2 of purchases you make with the debit card and one air mile for every $1 you spend on airline tickets.

Charter One's MegaRewards
Another bank tapping into the popular lure of frequent flier miles is Charter One in Cleveland. Its MegaRewards program for debit card customers offers free round-trip air fare on any airline as one of its top rewards. Other rewards include vacation packages to Napa Valley, Orlando and Costa Rica, a flat-screen TV, a Sony Playstation, a camcorder and digital camera as well as $10 to $50 gift cards for various retailers and restaurants.

With MegaRewards, you earn one point for each dollar of signature-based purchases you make with the card and pay a $25 annual fee.

A purchase made by punching in your PIN won't earn you a single rewards point and it could cost you $1. Some Charter One checking accounts charge $1 for every PIN-based debit transaction a customer makes.

Do your homework
Before you sign on for a debit rewards program, you'll want to study the costs carefully.

"Look at the rewards and size up the effort involved to get something meaningful," says Dave Bowen, a senior vice president at Charter One.

Here are some important questions to ask before signing up for a debit rewards program:

  • Is there an annual or monthly fee?
  • Is the reward something I really want?
  • Will I earn reward points on PIN- and signature-based debit card purchases or signature-based purchases only?
  • Will I be charged a fee for any PIN-based purchases I make with the card?
  • How long will it take me to earn my rewards?
  • When do my reward points or miles expire?

"There are a whole bunch of new wrinkles on these," says Linda Sherry, editorial director at Consumer Action, a consumer advocacy group based in San Francisco. "Do the math. Add in any fees."

Don't forget there's no float with debit cards. Purchases are pulled almost immediately from your checking account.

Get too carried away with your spending and you could wind up bouncing a check or two. And there's nothing rewarding about paying a $25 fee for every check that bounces.


-- Posted: Feb. 24, 2004




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