Rewards free of your bank

Cundiff cites Bank of America's Keep the Change program as one that shows some innovation beyond the basic points program. Another evolution is the decoupled debit rewards card, which will broaden the landscape. Decoupled debit rewards cards can be linked to any bank account, as opposed to the standard debit card, which is linked to a checking account at the bank that issued the card.

Capital One is leading the way and expects to have a decoupled MasterCard debit rewards card widely available in the near future. Gwenn Bezard, research director for banking and payments at Boston's Aite Group, says this card could be a significant improvement for consumers.

"There's a huge difference between the rewards programs of credit cards and debit cards. The actual value received by the customer is 64 cents for every $100 spent with a credit card, while the value received for a debit card program is 10 cents. The actual value that a customer will receive (with the Capital One MasterCard) is expected to be between 40 cents and 60 cents. That's four to five times higher than the typical debit rewards card."

The card will, as Bezard puts it, walk, look and feel like a regular debit card. The difference is the customer won't have a checking account with Capital One. Instead, funds for purchases are pulled directly from the customer's primary checking account, which could be with any institution. The money comes out of your account once a day and the customer can track individual transactions on the Capital One Web site.

"The notion of moving your checking account is a hassle. The fact that this card links to your existing checking account regardless of bank and then also offers rich rewards based on debit purchases we think is a win," says Capital One spokeswoman Pam Girardo.

Individual retailers may take advantage of this format by teaming up with other companies that offer a cheaper way to process card transactions by omitting the Visa or MasterCard connection. The retailer issues the customer a debit card that's linked directly to the customer's checking account. The card can be used at thousands of stores but the customer receives reward points when making purchases at the retailer whose logo is on the card.

See the full results of the Fall 2007 Debit Card Study and our detailed look at debit card rewards programs.