Debit card rewards programmes are starting to become an accepted part of debit card offerings. Few people would necessarily associate credit cards with particularly attractive rewards programs, and they certainly are not as generous as credit card reward programs. However, they are still worth considering.
Credit cards have traditionally had very good rewards programmes. This was for two reasons. Firstly credit card consumers could be quite valuable if they were the type of consumer who would spend on their card, and always pay off the minimum payment. These are the most profitable type of consumer for credit card providers as they do not cost as much as delinquent card holders while at the same time paying a large amount in interest.
The second reason was that credit cards would charge a merchant fee to shop keepers and service providers who took the card. This meant that encouraging consumers to spend using their card meant that the income from merchant fees would rise. So rewards programmes became a way of splitting the merchant fee with the card user.
Debit cards do not have the same opportunity for making as much money as a credit card. However there are reasons to offer rewards programmes. For a start there are still merchant fees charged to the shop keeper or service provider. There are also annual fees that are payable for many debit cards. Finally frequent debit card users are less likely to leave their current banks. With debit card users outnumbering credit card users, debit cards are now a serious business, and rewards programmes are one way of addressing this.
A debit cards rewards programme will still tend to offer less than a credit card rewards programme, but with a large amount of advertising aimed at encouraging customers to use their debit cards rather than cash, debit cards rewards are becoming an integral part of an everyday account
There is also the fact that consumers are more likely to switch current accounts than they were ever before. Debit card rewards can lock a consumer in as they will be losing the ability to trade on these rewards.
There is no typical debit card rewards programme, with ANZ – admittedly a large bank – offering three types, one of which is tied to air miles and two of which are shopping related. There are some common credit card rewards programmes that are unlikely to be seen with debit cards – for example cash back cards. However the rewards programme on a debit card may be worth looking at when comparing cards.
