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Most of us have associated rewards programs with credit cards, until now at least. It’s more then likely that you use a debit card at least a few times a week, if not more – especially if you’re not a frequent credit card user. Although sometimes I feel like we don’t discuss debit as much as we should, one thing that I’ve been fascinated with over the past year or so has been the increase in the number of “Cash Back Debit Card” offers that I’ve seen popping up.
A cash back debit card is very similar to a cash back credit card, offering a certain % cash back on all of the purchases you make. The reason that most debit cards have no rewards program is because they are fundamentally different than credit cards when used. Every time you use a credit card, the merchant has to pay your card company an interchange fee. The card company is then able to give a percentage of this fee back as part of a rewards program.
For debit card translations, merchants don’t pay an interchange fee and so the banks have no practical way to fund a rewards program.
In my quest for finding the best cash back debit card I’ve come across two cards that really stand out.
A few days ago I reviewed the Paypal Debit Card, which actually has a pretty impressive rewards program. With the PayPal Preferred Rewards Program you can earn 1% cash back on all online purchases, and purchases that you sign for in the store. Since Paypal only gives cash back on purchases that you “sign for” they are effectively getting around the interchange fee problem, by only offering cash back on purchases that include this fee. This is smart because it doesn’t effect you, although I’m sure merchants aren’t thrilled about the idea.
One of the best features of this card is that you can use your existing bank account to fund your Paypal account. By linking your existing bank account with your Paypal account money will automatically be transferred to your Paypal account whenever you use your card. This makes it easy to earn cash back without the hassle of managing another account.
The PerkStreet FinancialSM Visa® Debit Card essentially works the same way, offering 2% back on all non-pin transactions (purchases that you sign for, or select “credit” for.) for the first 6 months and then 1% after that. This card requires a PerkStreet Financial checking account. For those of you who are in the market for a new checking account, or just want to avoid Paypal – this might be a good option.
We recently covered some of the other great signup bonuses Perkstreet Financial is currently offering over at Bankshout.