THE HELP DESK The Help Desk: Top Tips

Debunking debit card rewards programs

If you have a credit card rewards program, and think you can get a similar one with your debit card, think again.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Gerri Willis, CNN personal finance editor

home_rich_cover.03.jpg
For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.

NEW YORK (CNNMoney.com) -- Debit cards: more and more consumers are swiping them. Issuers are taking notice and rolling out more rewards programs. But are debit reward programs all they're cracked up to be?

1. Debit cards are used more than credit cards

Right now, over half of transactions are from debit cards -- not credit cards according to TowerGroup.

By 2015, debit card transactions will account for nearly 60% of purchases. And, just like credit card reward programs were so popular, by the end of this year, more than half of debt card issuers will have a rewards program.

These programs are similar to what you'd get with a credit card: cash back rewards, frequent flyer miles, earning points with a specific merchant. But there's one BIG difference between credit card reward programs and debit card reward programs. Namely -- debit card reward programs are greatly watered down.

To get $100 in cash back rewards on a credit card, you have to spend $10,000. To get the same amount of cash back with a debit card, you'll have to spend double that, $20,000.

If it's travel rewards you want, to get $100 in value, you have to spend over $33,000 on a debit card, compared to about $16,500 on a credit card. That doesn't sound like a great deal to me.

Why the large discrepancy in what you get? Simply put, issuers don't make as much money with debit cards as they do with credit cards.

2. Don't get distracted

Don't get distracted by the rewards program says Brian Riley of TowerGroup. There are much more important things you need to know about a debit card.

What are the fees? Understand what the policy is regarding clearing checks. If you have $300 in your account and you write two checks that are pending ... one for $100 and the other for $400, some banks will clear the highest amount first triggering an overdraft fee. If you get two of these overdraft fees, there goes your rewards program advantage.

3. Debit vs. credit

Debit cards just aren't as safe as credit cards. This is a card that is linked directly to your checking account.

So, if fraudsters get a hold of your checking account, you could be exposed to ID theft. Although most banks have voluntarily extended zero liability to debit cards if there are fraudulent charges, there are no federal requirements says Curtis Arnold of Cardratings.com.

So, if you're buying something online or you're buying a big ticket item, sometimes a credit card is the better bet.

-- CNN's Jen Haley contributed to this article.

Got a financial dilemma? Go to CNNMoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN's Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions.

Talkback: What do you think about your debit card rewards program? Tell us and share your comments below. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
8 must-have travel apps Whether you've got wanderlust or an airline grievance, here are some apps to pack onto your phone. More
Hot stocks: 10 record breaking companies The S&P 500 is trading at all-time highs, and many well-known businesses are leading the charge. Time to buy or sell? More
My biggest retirement mistake Five CNNMoney readers share stories about saving that you can learn from. What they would do differently if they had another chance. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.