Comparing Two Online Cashback Debit Cards - Green Dot and Empower

by
Adam Rust

Green Dot’s new cashback debit card sounds different (and better) than almost any debit card out there – but is that true? If so, what’s good about the card and what is not?

The cashback provisions are undoubtedly generous.  Account-holders receive 3 percent cashback on any purchases made online or from inside the account app.

Furthermore, Green Dot has an optional savings account associated with the card. Currently, the account pays 3 percent interest.

Additionally, Green Dot is offering a $50 cashback bonus for signing up for an account.

Consumers also benefit from services that Green Dot offers on all of its cards: no overdraft fees, option to receive your paycheck up to two days early by direct deposit, and access to a surcharge-free ATM network.

Green Dot’s cashback offer makes the card stand out from the rest of the market. Very few debit cards offer cashback these days. A few have created rewards programs, but even so, they provide opportunities to buy discounted magazines – things that anyone could find elsewhere. An exception to the no-cashback debit card rule is the Empower checking account. It offers 1 percent cash back on up to $1,000 in debit card purchases each month. I will go into more detail on Empower later on in this post.

With all of those features, the Green Dot Unlimited Cash Back appears to be a hands-down winner.

However, let’s take a deeper dive.

Diving More Deeply into the Terms of the Green Dot Unlimited Cash Back VISA card

The terms and conditions of the Green Dot Unlimited card reveal some important game-changing details.

First, while you will earn cashback, you will not receive the money for a long time. Green Dot distributes accrued cashback only after an account has been open and utilized to make purchases for twelve months. The account has to be in good standing, as well - meaning that among other things, you cannot have a negative balance. In the interim, the bank retains ownership over the accrued bonus balance. You will not be able to claim the accumulated funds or use it to make purchases with the account during the accrual period.

The same waiting period applies to interest earned inside the savings account. At the end of the twelve months, Green Dot calculates the average daily balance of funds held in savings, multiplies that amount by 3 percent, and credits the funds to the balance of your savings account. The next interest payment occurs at the end of the next twelve-month savings year.

The same holds true for collecting the sign-up bonus. You have to wait until the end of twelve months before you can claim the benefit.

These days (post-Durbin), rewards programs tend to be the status quo for elite credit cards and little else.

The Empower Account
Picture of card

The Cons

The main problem is that you could pay more in monthly maintenance fees than you ever earned from cashback. Green Dot charges $7.95 per month to have the account. True, they will waive the fee if you spend more than $1,000 in the prior month. Remember, too, that your $1,000 spend can only consist of purchases. Funds withdrawn from the account at an ATM will not qualify, nor will purchases of money orders, traveler’s checks, prepaid debit card loads, casino chips, or similar quasi-cash services. Transfers from your Green Dot account to an external bank account or your linked Green Dot savings account will similarly not count. You cannot game the rules here. In essence, Green Dot will charge a fee to maintain an account, but they will make an exception if you use their card as a primary spending tool.

You have to keep the card active for the entire year to claim your interest, cashback, and signup bonuses. If you close the account, you lose your claim to those benefits.

The net result is that you could pay up to $95.40 in monthly maintenance fees before you receive any of the cashback and interest benefits of the card.

You should ask yourself how much you intend to spend online or via the card app. If you buy all of your groceries on Amazon, then you might come out ahead with this card. You will need to spend $3,140 online or inside the app to make up for the $95.40 in maintenance fees.

An Alternative

If you want a more effortless cashback experience, you might want to consider the Empower bank account. Empower does not charge a monthly maintenance fee, and in fact, it is possible to use the account and never pay any fees. In exchange for paying nothing, you will still get the benefit of cashback, and you will have the opportunity to set up a high-yield savings account.

Empower pays 1 percent cash back on all purchases you make with your debit card. Qualifying purchases include ones you make at the point-of-sale, online, or when you give your debit card numbers to a vendor over the phone. You can earn up to $10 (the first $1,000 in spending) in any given month.

Empower has a savings account, too. It currently pays 1.9 percent interest. Before the Federal Reserve lowered interest rates in August 2019, Empower paid 2.15 percent interest. It is always possible that the yield will go back up in the future. Your account receives a new interest credit each month.

Lastly, Empower is currently offering a signup bonus until the end of September 2019. They will credit an account with $10 on October 4th if it has received deposits totaling at least $50.

Which One is Better?

People who want a simple cash back experience should choose the Empower bank account. For those people who plan to purchases a lot on the internet, the Green Dot Unlimited Cash Back VISA could be better.

Finding the breakeven point depends on how much you plan to spend and what portion of that spending will occur online or in an app.

I ran a two-way data table to answer the question. My conclusion is that most people will be better off with the Empower account. In fact, for most people, the difference over the course of one year will be more than $100 in favor of Empower.

If you spend more than $12,000 per year and of that sum, more than 35 percent is made online or in an app, then you should use the Green Dot card. If you spend more than $15,000 and more than 27 percent is via online, then you should use the Green Dot card.

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