What are debit card rewards and how do they work?

Debit card rewards can offer shoppers a way to transform everyday transactions into potential savings.

Understanding how debit card rewards work can be key to maximizing financial perks, while still maintaining responsible spending practices. Here are some must-knows for managing a debit card with rewards.

How do debit card rewards work?

Debit cards with rewards allow individuals to earn rewards such as cash back, points, and other perks when using their debit card. The process could involve earning rewards for spending in specific categories, at certain stores, or on every purchase. Rewards terms and eligible purchases may vary depending on the debit card and card provider.

Some common rewards categories include:

• Debit card points: Points can typically be redeemed for goods, services, or gift cards.
• Cash back/Rewards: Earn a percentage of purchases back. For example, the PayPal Debit Card¹ is a debit card with benefits, such as earning PayPal Rewards points (redeemable for cash back) on eligible purchases.²
• Exclusive perks: Access special deals, discounts at partner merchants, priority service, or waived fees.

What is cash back on a debit card?

Cash back on a debit card incentivizes cardholders to spend by crediting a percentage of the transaction amount back to their account.

Knowing how to get cash back on debit cards can be one way to maximize rewards. While the terms and conditions will vary depending on the debit card and card provider, they typically involve:

• Specific qualifying purchases: Certain transactions may be eligible for cash back, such as purchases made at grocery stores, gas stations, or online. Other transactions, like cash withdrawals or transfers, may not qualify.
• Minimum spend requirements: Some debit cards require cardholders to spend a minimum amount per transaction or within a specified time frame to earn cash back.
• Caps on the amount of cash back that can be earned: There may be a monthly or annual maximum limit on the cash back a cardholder can accumulate.

The process of redeeming cash back also differs from one debit card provider to another. Cardholders can usually find details on the card provider’s online platform or mobile app.

Standard options may include direct credit to the cardholder's account, conversion into points for future purchases, or even donations to selected charities.

Debit card rewards vs. credit card rewards

Debit and credit card rewards both provide incentives for card usage, yet they each have unique characteristics and potential pros and cons.

Debit cards are directly linked to a bank account, with transactions immediately deducting funds from the available balance. Credit cards draw from a pre-approved line of credit, allowing cardholders to borrow funds up to a specific limit and repay at a later date, potentially with interest.

The nature of rewards can vary between debit and credit cards. Given the greater risk and potential interest revenue for lenders, rewards credit cards usually offer a broader range of perks. And cash back credit cards may have higher cash back percentages.

On the other hand, debit card rewards tend to be more modest, but come with the advantage of spending directly from one's bank account. Debit card rewards may also not be widely available.

Despite these differences, it’s important to approach both debit and credit card rewards carefully. Always prioritize wise spending habits over the pursuit of rewards. Rewards should serve as a bonus for sensible spending rather than a motive for making purchases.

Learn about PayPal Rewards.