There's a lot to like about bank debit cards: They're convenient. They don't involve a balance or interest expense. They look cool, and they come with rewards for frequent use.
Points, airline miles, cash back or even "Disney Dream Reward Dollars" can be yours if you sign up for the right plan and remember to swipe your debit card when you buy goods or services, according to Bankrate.com's 2010 Exclusive Debit Card Rewards Survey.
We all want rewards, right? Of course, we do.
But debit card rewards programs have a downside as well.
For starters, the programs have rules, restrictions and fees, which average about $25 per year. That means you have to earn at least that much in points, miles or cash back just to break even on the program.
What's more, banks don't offer debit card programs just to attract, retain or reward their customers. They offer these programs to encourage customers to spend more and process more transactions through their accounts. That's good for the bank because every time that customer swipes that card, the merchant has to pay the bank a processing fee. And one way or another, that fee comes out of all our pockets in the form of higher prices. The more rewards we earn, the more we pay for them.
Worst of all, debit cards are exactly like credit cards in one key respect: They're plastic, and we all know that "plastic money" encourages us to shop more and spend more because it doesn't seem real. Sometimes, we even refer to plastic as if it were real money as in "pay with plastic" or "Do you accept plastic?"
Unlike cash, plastic disconnects us from the value and cost of money. That's part of plastic's cool factor: It lets us spend without having to actually think about our financial situation.
Dollar bills and coins don't have a reward program, but nor do they have rules, restrictions, annual fees or processing fees. And they aren't plastic money.
So are the convenience and rewards of debit cards worth those downsides? Or would most of us be better off financially if we just said no to any more plastic money?