Air travel miles and cash back aren’t just perks for credit-card holders. Debit-card users can get in on the action too.
Citibank C, -0.86% is considering expanding a program that gives customers rewards for opening an online-only checking and savings accounts, Stephen Bird, head of Citi’s consumer banking division, told a recent conference in New York. One potential way of doing this: Offering debit card rewards to Citi credit card holders.
Bird said that Citi could work with partner companies such as American Airlines AAL, -1.52% to offer rewards, according to PaymentsSource.com. (A spokesman for Citi said the company has no further comments on Bird’s statement about expanding the program.)
Citibank already offers the chance to earn rewards with deposit accounts via its “ThankYou” rewards program, which lets customers use points for travel rewards, gift cards and cash back.
Unlike credit-card rewards, they’re not based on how many transactions customers make each month; rewards are earned after milestones like linking a checking and savings account, completing bill payments or making a direct deposit each month.
Financial services companies want to reward customers
PayPal PYPL, +0.57% Discover DFS, -0.64% and American Express AXP, -0.14% currently offer rewards on debit cards or checking accounts.
PayPal’s Business Debit card offers 1% cash back on eligible purchases. Discover offers a “Cashback Checking” account, which gives 1% cash back on up to $3,000 of eligible purchases each month. And American Express offers 1% cash back on purchases on its “Serve” card, a prepaid debit card. Cleveland, Ohio-based Key Bank also offers one point for every $6 customers spend on eligible purchases made on their debit cards.
Debit-card rewards used to be more popular, but they declined after the Durbin Amendment, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, said Matt Schulz, a senior industry analyst at the credit-card website CreditCards.com.
The Durbin Amendment limited debit-card interchange fees, meaning merchants were able to pay banks less when customers used debit cards. Many banks then cut back on perks and increased fees.
But it’s possible debit-card rewards are making a comeback, as banks keep trying to keep their customers happy, Schulz said. Discover, for example, said in a recent earnings call that their checking account rewards have been successful.
“I would think this would be attractive for folks who don’t use credit cards at all, but would still want some rewards,” Schulz said.
Still, rewards are just one part of what makes customers happy with their banks, said Colin Kennedy, managing director and chief operating officer of the app Clarity Money, part of consumer-banking business Marcus by Goldman Sachs GS, -0.67%
“We’re not seeing a ton of jumping from accounts to accounts,” he said.
Credit card rewards are still more generous
Debit card and checking account rewards are small compared to what many credit cards offer. The Amazon Prime AMZN, +1.87% Rewards Visa, for instance, offers 5% cash back to customers who shop at Whole Foods and on Amazon.com purchases, 2% back at restaurants, gas stations and drugstores and 1% back on all other purchases.
The Uber Visa card offers 4% back on restaurants, takeout and bars, 3% back on airfare, hotels and vacation home rentals, 2% back on e-commerce purchases and 1% on all other purchases.
One obvious caveat: Credit cards often charge interest of 20% or more, which quickly offsets any rewards earned for customers who don’t pay their bills in full each month.
Debit cards were the No. 1 payment method Americans used in 2016, according to The Nilson Report, a company that analyzes the card and mobile payments industry. It analyzed data from the U.S. Bureau of Economic Analysis.