After Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, banks responded to the bill’s caps on debit card interchange fees by reducing the number of perks that had previously become common in the marketplace. Chief among the rollbacks were debit card cash back rewards programs. Increasingly, banks either offer no rewards on debit or only non-cash points.
The legislation had the additional and perhaps unintended effect of changing how banks messaged to consumers on payments. It marked the moment where credit cards returned to their “top-of-wallet” position. To the extent that retailers saw their interchange fees drop on purchased made by debit cards, it represented a win. On the other hand, since it meant that more people – particular the higher-dollar spenders – shifted to credit, it may have increased their overall costs of interchange.
Nonetheless, some opportunities remain for getting cash back on your debit card purchases. There are a few caveats that I want to mention. First, debit card rewards programs only cover purchases made through one of the card networks. They will not provide you with cash back if you make a payment through ACH (auto debiting of a cable bill, for example) because those transactions do not generate revenue.
Of note – I have not surveyed cash back cards designed for use by business owners. There are several cards out there to meet this specific audience.
In addition to sharing examples of cards that I found that pay cash back, I have also offered my views of their overall value proposition. In my opinion, the best debit cards offer cash back without a corresponding set of tricks such as high monthly fees or limitations on the types of purchases that qualify.
1. Discover Cash Back Debit: Earn 1 percent on the first $3,000 per month. No monthly account fees. GRADE: A
2. Empower Bank Account: You can receive 1 percent cash back on the first $1,000 per month. The discount is available for point-of-sale PIN and signature transactions, online orders, or over the phone orders. No monthly account fees and no credit check as a condition of approval. (smartphone signup only) Additionally, you can receive 2 percent cash back during the first month you have the account and during any subsequent month when you refer a friend to Empower who then opens an account. GRADE: A
3. Axos CashBack Checking: Axos provides 1 percent cash back, but only on signature point-of-sale transactions. GRADE B. The condition that a person must use a signature could cap some of the benefits. It would eliminate all card-not-present transactions (online, over the phone). Likewise, if your retailer choosers to process the transaction without a signature, you will miss out. Grade B
4. Radius Rewards Checking: 1 percent cash back on accounts that meet one of the following criteria: keeps an average daily balance of $1,000 or more, receives a qualifying direct deposit, or has a similar balance among this and other deposit accounts at Radius. No monthly maintenance fees. Note – applicants must deposit at least $100 to establish the account. GRADE: B minus
5. Uber Cash Back VISA Debit Card: While you can earn some hefty percentages with this card, it only applies to a narrow set of merchants. At the moment, the card gives cash back of between 1.5 and 2 percent at Walmart, 10 percent at Advance Auto, 3 percent at Exxon Mobile, and 15 percent at Jiffy Lube. It is a great card if you drive for Uber, as the card’s technology has integrated an additional suite of benefits that meet their needs. For the rest of us, there are better options out there. GRADE: C
6. American Express Serve Cash Back Card: Amex offers unlimited 1 percent cash back, but there is a catch: you will have to pay a fee of $6.95 per month to participate in the program. Thus, you need to spend $695 each month before you can benefit from the card. GRADE: D
7. The Green Dot Cash Back VISA: You can receive 5 percent cash back on purchases, with a maximum benefit of $100 in cash back per year. However, you will have to pay $9.95 per month to maintain the card. You can only redeem the rewards annually, so the only real benefit of the cash back is to reduce some of the cost of having the account. GRADE: F
Some banks offer what I would consider to be a watered-down version of cash back. The “deals” model involves a system of non-cash points that can be used to purchase goods at discounted rates. Usually, the purchases must occur through a bank portal, raising a question in my mind as to whether the deals program is a revenue-creating lead generation operation designed to benefit the bank. It’s not out of the range of possibility.
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