What is Cashback on Debit Cards & how does it work?

Cashback on debit cards has been a much-awaited feature by banking customers worldwide. Until recently, banks offered cashback and reward programs only with credit cards. The fiercely competitive nature of the banking industry to lure in new customers, however, has compelled banks to create debit card cashback and several other features previously held back.

Cashback rewards with debit cards are becoming the new normal, with almost every bank joining the cadre.

What is cashback on a debit card?

In a cashback rewards program, customers might get a portion of the money they spend buying returned to them. Some debit card accounts now offer cashback incentives in addition to stores, internet retailers, and other places that previously only provided them with credit cards. 

How does the cashback program with a debit card work?

Cashback rewards operate differently depending on the program you are enrolled in. The bank often pays cashback on debit cards to the customer directly.

Two factors determine your eligibility for cashback:

1. the rewards scheme you choose; as well as 
2. your actual spending.

Keep in mind that spending money is the only method to receive rewards. Therefore, consider how you can benefit from a cashback program without altering your regular spending patterns before committing. If so, you will probably receive your money back without going over budget. If not, look for a program that fits your lifestyle better. 

Cashback on debit cards vs. cashback on credit cards

One significant difference between paying with a debit card and a credit card is where your money originates.

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Do cashback debit cards merit the expense?

Cash back debit cards are a reasonable option for people who dislike using credit cards and have credit card debt they are trying to pay off. With debit card rewards, you can accumulate points while making purchases with funds from your account, which can help you avoid accruing debt that you cannot pay off. 

However, if you choose debit over credit, you should take extra precautions to monitor your accounts and keep an eye out for fraud. Keep in mind that debit cards do not provide the same liability protection as credit cards, even though both credit cards and debit cards have security features like encryption and fraud monitoring.

Quick Fact:
The majority of credit cards have 0% fraud liability, and the Fair Credit Billing Act’s protections only allow cardholders to incur losses of up to $50.

6 debit cards with cashback bonuses

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Amex Serve® Cash Back Prepaid Debit Card

Rewards: Unlimited 1% cashback
Monthly Fee: $7.95 per month

This prepaid charge card functions and has a similar appearance to a debit card, but as it is not linked to a traditional checking account, there are no checks and no overdraft protection. 

You can reload this card with more funds for $3.95 per transaction. Paycheck direct deposits are entirely free to set up. Your pay is put on the card, after which you can spend it and get 1% back. The drawback is that you will not have checks on hand to pay someone who won’t accept the card, like your landlord.

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PayPal Business Debit Mastercard

Rewards: Earn 1% cash back when purchases are charged as a credit on your debit card. (only on purchases not requiring a PIN)
Monthly Fee: $0

The PayPal business account enables you to accept payments online and via the PayPal mobile app if you work as a freelancer on the side or own a business. Additionally, the Business Debit Mastercard gives you immediate access to funds online and offline.

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Discover Cashback Debit

Rewards: Earn 1% cash back on up to $3,000 each month.
Monthly Fee: $0

With the Discover cashback debit card, you can receive up to $30 in rewards from your monthly purchases, for a total of $360 annually.

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Empower Debit Card

Rewards: Earn up to 10% cashback.
Monthly Fee: $0

If you have an Empower Card, you may take advantage of exclusive offers to earn high cashback rates. For instance, there may be promotions for 5% cash back on groceries or 8% back on gas. Empower strives to make bargains simple to use so you will not be forced to use arbitrary offers from businesses you never go to.

It is important to note that most other cards offer cash back on all purchases, not simply those falling into particular categories.

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Bank of America Debit Card

Rewards: Earn up to 15% cash back, but only from select merchants.
Monthly Fee: $0

In most regards, the Visa debit card issued by Bank of America is typical. The BankAmeriDeals program, on the other hand, provides users with cash back incentives from many retailers. Participation is free for all BOA debit and credit card holders.

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Axos Bank’s Cashback Checking Account

Rewards: Earn 1% cash back on purchases that require a signature, but only if you maintain a daily average account balance of $1,500. If your average balance drops below $1,500, you earn 0.50% in cash back.
Monthly Fee: $0

A cashback debit card from Axos Bank also covers your domestic ATM fees.

Where can you get cashback on a debit card?

You can get cash back from some retailers using your debit card without going to the bank or ATM. Instead, you can withdraw money from your bank account to pay for your goods. 

Many supermarkets, drugstores, superstores, convenience stores, and office supply businesses provide cash back on debit cards. The same is true at some petrol stations.

Here are some of the stores that provide cashback.

Takeaway

Cashback debit cards can be a decent alternative, even though they do not provide as many perks and advantages as rewards credit cards. If you are looking for a cashback debit card, compare different cards to find the highest reward rates and the features you will value the most. Also, consider:

• The hidden fees some cashback programs have;
• The conditions under which cashback programs work, as often it might only be available on items you do not usually purchase.