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A debit card that pays?

By Leslie McFadden ·
Monday, July 19, 2010
Posted: 2 pm ET

Today Bankrate released the results of our first-ever survey of debit card rewards programs. The 40 programs available through larger banks and credit unions varied in terms of restrictions and payout, but most offer fee-free rewards with no cap on the amount you can earn.

Signature-based transactions generate more interchange revenue for the card issuer than PIN-based transactions, so many debit card rewards programs only pay if you sign when you swipe. A dozen cards in our survey pay out for PIN-based purchases, offering a return anywhere from 0.1 percent to 0.5 percent of the purchase. Signature-based transactions command a return ranging from 0.2 percent to 3 percent.

Some cards offered higher payouts on transactions in certain categories, such as travel or everyday purchases. For example, the Bank of America US Airways reward card awards double miles for US Airways purchases.

Watch out for fees, expiration

Rewards have a shelf life of five years or less in many of the programs sampled by Unused rewards expire after two years for 7.5 percent of the programs, after three years for 32.5 percent of the programs, and after five years in 10 percent of the programs.

While most programs don't charge annual fees, the ones that do charge anywhere from $12 to $55. Fee-free cards probably make more sense for most folks, unless you'd spend enough to offset the fee in rewards.

Check out the survey results and analysis written by my colleague, Sheyna Steiner.

Would you sign up for a rewards debit card?

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July 21, 2010 at 2:10 pm

These information about credit cards are very useful to us. Thanks for this informative blog...

Sheyna Steiner
July 20, 2010 at 9:45 am

Thanks for mentioning the PayPal debit card program. I didn't have room in the story to mention every debit card rewards program. As for the survey, PayPal is not a bank so would not have been included.

July 19, 2010 at 6:22 pm

uh, where's paypal in all of this? depending on when you joined you get either 1% or 1.5% cash back on all purchases - if you use it as a credit card and not a debit card. plus you get a little bit of interest on your cash balance in the account.

C. Burke
July 19, 2010 at 4:23 pm

My credit union converted my debit card into a rewards card, but I hardly use it because it's 0.3% when I can get 3-5% with my regular reward credit card. Although, with all the changes, and the lowered rewards and higher fees on the normal rewards card, it might not be long before this is the only way to get anything.