Debit reward cards

Rewards for using debit cards are a relatively new area, but many major banks are pushing this idea.

Debit reward cards essentially work from intercharge fees, which are the fees that debit and credit cards charge merchants for processing their payments.  To get the intercharge fees charged it is necessary to swipe and sign for the card rather than use a pin number.  This means that pin number transactions can get lower rewards, and sometimes no rewards at all, compared to transactions that need to be signed for. 

Typical Credit card rewards programs include air miles, cash back and discounts off certain store items.  Debit cards offer similar but lower rewards because credit cards partly finance their rewards through the interest they subsequently charge the borrower if they keep a balance.  As this is not available with debit cards, which are directly tied to a bank account, then the rewards offered are not as generous.

Another reason for the lower rewards is that debit cards are only offered by banks.  Credit cards by contrast are often offered by stores and service providers, particularly airlines.  As these can offer generous rewards by offering surplus stock (for example spare seats can become air miles by restricting their use on busy flights) then they tend to offer some of the best rewards deals, albeit with a higher rate of interest.  Debit cards are rarely offered through these companies and so there are fewer rewards on offer.

Some debit cards can offer enhanced rewards for having other products such as loans, mortgages or credit cards.  These are often called loyalty bonuses.  Rewards can also sometimes be enhanced by belonging to a personal banking program where a higher monthly fee is paid for the current account.

Many debit card providers make annual or monthly charges, and these tend to be higher for programs with rewards.  It is often the case if a reward is not particularly desired that the extra cost of the annual charge will outweigh the reward being offered.

Many reward cards will pay the rewards annually.  This can mean that there will often be a long wait until the rewards come through.  However some programs do offer monthly or quarterly rewards payments.

Rewards points can often expire after a certain period of time.  It is important to check that air miles that are being saved up will not simply expire by the time they have been fully saved.

Debit rewards cards are also particularly prone to being changed at short notice.  This is particularly likely if a card stops being advertised.  Under the Credit Card Act 2009 there the 45 day period for changes to be notified does not apply to debit cards.