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Just rewards? Debit card perks shrinking

NEED TO KNOW
  • Debit card rewards availability down 30% from 2010
  • Still, as many as 71% debit rewards cards have no fees
  • Check out creditcardtuneup.com for best reward options
Just rewards? Debit card perks shrinking

I’m sure most people are sick of hearing about each new development the banking system has to offer, since, let’s be real, the story usually ends with you owing another type of fee. Well, this time you don’t owe anything, but you just might have to work a little harder to get back what you expected.

According to a new Bankrate.com survey, the availability of debit card reward offers fell 30% from last year. The good news? The programs that do still exist remain unchanged and beneficial -- for the most part.

“The Federal Reserve’s new cap on debit interchange fees is leading many debit card issuers to discontinue their rewards programs,” said Greg McBride, CFA, senior financial analyst for Bankrate.com.

The recent changes by the big banks are part of a move to recover revenue lost after new federal rules reduced what banks can charge retailers every time customers swipe their debit cards. Fees for retailers are now capped at 21 cents, down from an average of 44 cents, which has led issuers to find ways to make up that loss.

Bank of America’s latest monthly fee will hit customers who use their debit card for purchases at least once in a month, and whether you choose the “debit” or “credit” option at the register won’t matter. This fee means BofA’s most basic checking accounts will see a 40% hike in monthly costs. Wells Fargo and JP Morgan Chase are also testing monthly debit card fees. Citibank recently notified some customers that they would soon have to start paying for checking accounts if they don’t keep a minimum account balance. Those fees are as high as $20 a month for customers who have gotten used to paying nothing.

This may come as a shock, but there are still rewards programs that don’t include those nasty bank fees. Bankrate’s study found that 71% of debit rewards cards have no annual or monthly fees, up from 50% last year. Wait, there’s more! A whopping 71% have no cap on rewards and 61% have no expiration on rewards, a jump up from 45% last year.

“On the bright side, disciplined spenders can utilize reward programs as compensation for purchases they’d make anyway,” said McBride.

So if you look hard enough, you can still find a debit card that offers you more than just a monthly fee. For those rewards programs that do still exist, 0.5% is still the most common payout ratio. The highest rewards reach 1%, while the lowest hit 0.25%, so do your research!

And while we’re talking about rewards, I should mention credit cards, and NextAdvisor’s recent travel rewards cards survey. The Starwood Preferred American Express card topped the list as having the highest rate of rewards, with a payback of more than 2 cents per dollar charged. That one is far more generous than any other hotel program. The top airline card? Drum roll, please…Southwest Airlines Rapids Rewards card, which offers an earning rate of 1.7 cents of value per dollar charged.

So if you’re in the market for a new card, figure out which one would make the most sense based on your personal spending habits. Check out creditcardtuneup.com, enter your monthly expenditures, and see what card would work hardest for you!

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