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Most debit cards don't offer rewards, but a few provide cash back. Terms vary, with some offering cash back on every purchase, while others limit rewards-earning potential to select merchants. If you prefer using debit to credit but don't want to miss out on rewards opportunities, read on to learn how cash back debit cards work and what to consider to select the card that's right for you.
How Do Cash Back Debit Cards Work?
Cash back debit cards work similarly to cash back credit cards: When you make an eligible purchase, you earn a percentage of the amount you spend in cash back. Rewards generally get deposited into your account each month.
Example: If you use your debit card to make $1,000 in purchases, and the card has a 1% rewards rate, you'll earn $10.
Some cards offer a flat rewards rate on all purchases. Others may have higher rates but only offer rewards on purchases at certain retailers. Depending on your spending habits, different reward structures may offer you different earning potential.
Debit cards with cash back rewards often cap how much you can earn each month and may also have an annual maximum. Depending on the card, you might need to activate offers before making a purchase to earn cash back.
Pros and Cons of Cash Back Debit Cards
Before you sign up for a checking account that has a debit card with cash back rewards, it's important to understand the benefits and potential drawbacks of using one.
Pros
Rewards for everyday spending: You can earn cash back on purchases you'd be making anyway.
No debt: Debit cards are linked to your checking account. Because the money is deducted from your account when you make a purchase, you'll never carry a balance on your debit card, and your purchases won't accrue interest.
No credit check: Credit card issuers perform a credit check when you apply for a credit card to see if you qualify. Debit cards don't require a credit check.
Perks: Cash back debit cards may come with fee-free withdrawals, ATM fee reimbursements and other benefits.
Cons
Rewards limits: Rewards rates on debit cards are often lower than those available on credit cards. Banks may cap the amount of rewards you can earn each month and each year on debit card purchases.
Qualifying purchases: Some debit cards only offer rewards on certain purchases.
Activation requirements: Debit cards from some banks require you to activate offers before you can use them. If you don't, you won't earn cash back when you make a purchase.
Overdraft fees: If you don't have enough money in your account to cover a transaction, you could trigger overdraft fees if you've opted into your bank or credit union's overdraft protection program. You could incur multiple fees if you try to make multiple purchases without realizing you don't have enough money in your account.
No credit-building: Credit card issuers report monthly payments to the three major consumer credit bureaus—Experian, TransUnion and Equifax. Debit card purchases aren't reported so they won't help you build credit.
Account requirements: Debit cards are linked to checking accounts that may have minimum opening deposit and monthly balance requirements.
Are Cash Back Debit Cards Worth It?
Cash back debit cards provide a way to earn rewards without the risk of racking up high-interest debt and may be a good option for people who:
- Can't qualify for a rewards credit card: You typically need good or excellent credit to qualify for a rewards credit card.
- Already use debit cards: If you already use debit to make most of your everyday purchases, you could earn rewards without a credit check.
- Are tempted to overspend with credit cards: Because debit cards are linked to your checking account, you can typically only spend the cash you have in your account. However, if you opt in to your bank or credit union's overdraft program, it may cover transactions you make even if you don't have enough cash in your account to pay for it, which can trigger fees and result in a negative account balance.
- Want to avoid interest charges: Debit cards can't carry a balance, and purchases are never charged interest, so you won't accumulate high-interest debt.
Learn more: Credit Card vs. Debit Card: How Are They Different?
How to Choose the Best Cash Back Debit Card
As you compare your options, make sure you understand the terms for earning rewards and consider the potential limitations before making a decision. Here are some tips for choosing a card that suits your needs.
- Compare rewards rates and structures. Different cards have different rewards potential. Some offer a flat rate on all purchases. Others may have higher rewards potential but only allow you to earn rewards on certain purchases.
- Watch for rewards caps. Debit cards typically limit how much you can earn in rewards each month and year.
- Review account fees. Checking accounts may charge fees for overdrawing your account, using out-of-network ATMs and more.
- Evaluate your spending habits. You may be able to earn more with a card that only provides rewards for certain categories of spending if it aligns with your spending habits.
- Take a holistic approach. Getting a cash back debit card requires opening an account with a financial institution that offers one. Evaluate other features and benefits you may receive when you open an account, such as early access to your paycheck with direct deposit, budgeting tools, spending insights and more.
Other Types of Rewards You Can Earn With a Debit Card
Some debit cards may offer rewards other than cash back, such as points, travel miles and discounts on certain purchases. You can typically redeem points or miles for gift cards, travel or experiences. If you're thinking about getting a debit card that provides rewards other than cash back, calculate the redemption rate to determine which card offers the best value.
The Bottom Line
Cash back debit cards offer an alternative to rewards credit cards for people who prefer to spend only the cash they have, don't want to accrue interest charges and want to earn rewards on everyday spending. But they generally have lower rewards rates than credit cards plus monthly and annual caps that limit what you can earn.
For more rewards potential, consider a rewards credit card. The best cash back credit cards tend to require a FICO® Score☉ Θ of 670 or higher, so check yours before applying to see how likely you are to qualify. You can check your FICO® Score and Experian credit report for free anytime, and Experian's card comparison platform can pair you with credit cards that match your credit profile.
If you don't think you'll qualify, consider working on improving your credit before you apply. In the meantime, you can still earn cash back through a debit card.