Debit cards offering rewards

September 2, 2009 3:58:30 PM PDT
The recession is changing the way Americans pay. In the last part of 2008, debit card use outpaced credit cards. As consumers reach for debit cards, banks are responding with rewards programs usually seen on credit cards.Americans spent more than $200 billion by using debit cards in just the first three months of the year, and debit card use is expected to keep growing. Now debit card users are finding a benefit for using their debit cards.

Credit card rewards programs have kept Scott Patterson loyal to his American Express card.

"I have used it for gifts that I give to people and used it for a trip once or twice," said Patterson.

Debit cards are now seeing some of the same rewards that were once the exclusive realm of their credit cousins. That's good news for Buddy Mays.

"My wife has a debit card that she uses," said Mays.

The rewards programs range from points to cash back, and since debit cards are now being used more than credit cards, consumers have the potential to bask in the benefits.

"It is a great thing. It is the market place at its best," said Dan Parsons of the Houston Better Business Bureau. "Creditors have said, more people are with it, let's make our debit card more attractive so they are putting more things out there."

While it's good that debit cards offer rewards, Parsons says shoppers have to be smart when choosing debit over credit.

"When you buy something on credit, you swipe it, it is done and you wait for your bill. With a debit card purchase you do the same thing, but you may not know that stores' policies, they may be taking a sizable amount of money on what they call a hold," said Parsons.

He says half the complaints his agency gets involve such holds and the overdraft fees that can result from them. He adds those fees can be up to $35 per overdraft and can easily wipe away any rewards earned.

"Once a month I go in and see if this makes sense, once a month I pay this because I promised to do it for getting credit, but with that debit card, you have to know every day," said Parsons.

Another thing to remember, there are some protections for credit card users that do not apply to debit card users, from fraud to charge backs. However if you manage your account wisely, just like credit card rewards, you can benefit from using the cards.

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