Debit Card Reward Programs - Are They Worth It?
By Ven North
In the age of declining credit, when people are turning away from using credit cards and are starting to use cash and debit cards, also known as check cards or bank cards, numerous debit card reward programs are mushrooming across the world, and particularly in the USA.
So how do you know which debit card reward programs could be good for you? There are three components of every reward program you need to look into to determine whether you should apply for this or other debit reward program. They are, simplicity, relevance, and profit to you. These three components will decide whether it is worth getting a new bank card and enrolling into the bank card reward programs. Let's see all three reward program components in action.
Simplicity of a debit reward
It is clearly beneficial if you can summarize your debit card benefit in one sentence. That way you will always know whether to use this particular bank card when you are paying for a particular item. For instance, the REDcard check card at Target will save you 5% on all items bought at Target, and will not save you anything on other purchases. Or, the PayPal check card will save you 1% on all purchases. That is simple.
Relevance of the debit card rewards
If you shop at Target frequently, then the Target debit card makes sense for you. Likewise, when the bank card rewards can be turned into cash, that is a relevant reward for most of us. However, when the only way to redeem the rewards is to buy overpriced kitchen items or for travel to exotic destinations that you have no intention visiting, that is a non-relevant bank card reward.
Profitability of the bank card
Unless we are very careful, we consumers "pay" for the convenience and relative safety that comes with using check cards through the check card overdraft fees, through interest on overdrawn checking accounts. When you do not have a proper system in place to prevent overdrafts, then even the best cash back card will not be profitable for you.
Another issue regarding profitability of a check card is the annual fee. It is easy to see that, for any card with an annual fee, even as little as $25 per year, you would need to spend $2,500 per year and receive 1% cash back on all purchases just to break even. On the other hand, the cash back card with no annual fee will become profitable for you with your first purchase, as long as you make sure there will be no overdrafts on your account.