Are Debit Card Rewards Worth Considering?Posted September 20, 2017 in Personal Finance
Do you prefer using your debit card over your credit card in certain instances? You’re not alone. When you’re at the supermarket, it can be convenient to use your debit card and request cashback at no extra charge. It’s a lot easier than going to the ABM to get cash.
Likewise, for some people with spending issues, they prefer debit over credit because it’s typically easier to control your spending. You’ll need to keep an eye on the balance in your chequing account, otherwise you could face costly overdraft charges.
Until recently those who used debit cards didn’t get reward for their spending. That’s quickly changing. There are now several debit card on the market that offer rewards similar to credit cards, including the SCENE ScotiaCard and President’s Choice Financial No Fee Bank Account. Similar to reward credit cards you’ll earn rewards for your spending. Are these debit cards worth it? Let’s take a closer look.
How Reward Debit Cards Work
Reward debit cards are similar to their similar to their reward credit card cousins. You’ll receive points for every dollar you spend on your debit card. Depending on your debit card, you may receive points on all purchases or only at certain retailers. These reward debit cards are usually as a result of a partnership between the bank and a retailers. For example, with the SCENE ScotiaCard, it’s a partnership between Scotiabank and Cineplex movie theatres. In some cases you’ll get a special chequing account just for your rewards debit card with similar terms as your standard chequing account (though read the fine print to make sure there aren’t any extra charges).
The Pros and the Cons of Reward Debit Cards
Most banks aren’t offering reward debit cards solely out of the kindness of their hearts. Some banks charge you a yearly account fee or a higher debit transaction fee in exchange for the rewards you’ll accrue. You’ll also want to consider your shopping habits. If you aren’t a regular shopper at the retail partner, it probably isn’t worth signing up for a rewards debit card with said retailer.
Some rewards debit cards also offer handsome bonuses. Similar to a credit card that offers a sign up bonus, you could get bonus reward points with your debit card for setting up direct deposit with your rewards chequing account. You may also receive bonus rewards if you keep your minimum balance above a certain dollar threshold.
Again, do the math to make sure the rewards are worth it. If you have to keep a $5,000 minimum balance to earn the rewards, you can probably earn more elsewhere in a high-interest savings account.
The Bottom Line
Reward debit cards are worth using in certain instances, but credit cards are still king in most cases. Not only do credit cards typically offer higher reward accruals, they offer other perks many debit cards lack, including consumer protection and insurance. If you really like a reward debit card, why not use it with a reward credit card? You can take advantage of the benefits of each.