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Debit cards make it easy to pay for purchases directly from your checking account, but that doesn’t mean they are worry-free. First off, paying with a debit card leaves you with more liability for fraudulent purchases when compared to credit cards. Not only that, but debit cards are light on perks, whereas cash back credit cards often come with benefits like extended warranties, guaranteed returns or purchase protection against damage or theft.
Still, some debit cards are definitely better than others, and there are even a handful of cash back debit cards to choose from. If you’re on the fence about earning debit card rewards or choosing another payment method, you should arm yourself with information before you decide.
Cash back debit cards vs. rewards credit cards
When it comes to paying with a debit card versus a credit card, one important distinction is where your payment comes from. Debit cards are connected to your checking account, so the amount of each purchase made is deducted from your bank account right away. This means that, with debit cards, you can only make purchases up to the amount of money you have in your account.
Credit cards work differently because they extend a credit line you can borrow against, up to a designated credit limit. Purchases you charge to a rewards credit card are added to your credit card balance, and you are required to pay at least a minimum payment amount each month. Rewards credit cards also charge interest if you don’t pay your balance in full when your bill is due, whereas rewards debit cards do not.
Another difference is that rewards credit cards help you build credit history and your credit score, whereas debit cards do not build credit. Finally, rewards credit cards tend to offer much more lucrative rewards programs than cash back debit cards, and many also offer sign-up bonuses to boot.
Are cash back debit cards worth it?
At the end of the day, rewards credit cards can be more useful than cash back debit cards. But since credit cards lead many people into a lifetime of debt, and since they charge high interest rates for balances you carry from month to month, plenty of consumers should steer clear of credit cards altogether.
Cash back debit cards are a good alternative for anyone averse to using credit cards, as well as consumers with existing credit card debt they are trying to pay off. With debit card rewards, you get the chance to earn points for your purchases while using money from your own account, which can help you avoid racking up balances you cannot pay off.
Debit card vs. credit card security
If you do opt for debit instead of credit, you should take extra measures to oversee your accounts to watch out for fraud. While both credit cards and debit cards boast security features like encryption and fraud monitoring, debit cards do not offer the same level of protection against liability as credit cards do.
In fact, most credit cards come with zero fraud liability, and credit card customers are limited to $50 in losses at most due to protections in the Fair Credit Billing Act (FCBA). With a debit card, on the other hand, you could be liable for up to $500 in losses if you report fraud more than two business days after you notice the loss or theft or up to 60 days after your statement is sent to you. If you report the fraud after that point, the Federal Trade Commission (FTC) says you could lose “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.”
Best debit cards for earning rewards
If you decide you want to pursue debit card cash back, you should compare the best cash back debit cards. The top options are highlighted below:
Discover Cashback Debit Card: Best for no minimum account deposit
The Discover Cashback Debit Card and Discover Checking come with no annual fees or ongoing fees, and there’s no minimum deposit amount required to open an account. Once you are a customer, you can earn 1 percent cash back on the first $3,000 you spend on your debit card each month (or up to $30 per month in rewards.) You also get perks like online bill pay and free withdrawals at over 60,000 ATMs nationwide.
Axos Cashback Checking: Best for big spenders
The CashBack Checking Account from Axos lets you earn an unlimited 1 percent back on all transactions that require a signature, which can add up quickly over time. This account also comes with no monthly maintenance fees, unlimited check writing privileges and unlimited fee reimbursement at domestic ATMs. You also get special features like two-step account authentication, account alerts and online bill pay.
American Express Serve Cash Back Prepaid Debit Card: Best prepaid card option
The American Express Serve Cash Back Card is a prepaid debit card, meaning you have to “load” your card with money before you can use it. However, this card offers generous debit card rewards in the form of 1 percent back for each dollar you spend in person or online. There are no annual fees or hidden fees to be aware of, and you get free early direct deposit and free ATM withdrawals at more than 30,000 MoneyPass ATMs nationwide.
PayPal Business Debit Mastercard: Best for businesses
The PayPal Business Debit Mastercard makes it easy to pay for purchases and access money in your business PayPal account. This card doesn’t charge an annual fee, and you also earn 1 percent back for each transaction you make. You can also use your PayPal Business Debit Mastercard to access cash at ATMs and select retailers when you make a purchase, although fees may apply.
The bottom line
Cash back debit cards don’t come with as many perks and benefits as rewards credit cards, but they can be a good alternative if you don’t want to pay with plastic. Just make sure you compare cash back debit cards to determine which ones come with the best rate of rewards and the benefits you want the most, such as free ATM withdrawals.