Are Cash Back Debit Cards Worth It? How Do They Work?
Last Updated on July 15, 2022 by Admin
Many people prefer using credit cards over debit cards to make various payments because they provide access to reward programs and better protection against fraud. In contrast, debit cards don’t come with perks like extended warranties, guarantee returns, or purchase protection against damage or theft.
Today, credit card providers face a competitive marketplace. That is why banks, nowadays, are providing incentives and rewards in the debit card arena too. Now debit card users can also get rewards in the form of price discounts, points, and cash back whenever they use their debit cards.
So, a debit card with a cash back option can turn out to be an excellent option for people with limited credit card choices or bad credit.
Are debit cards with cash back worth it?
It can be overwhelming to try to get approval for an unsecured credit card with cash back benefits, especially for people with no credit history or a poor credit score. At times, opting for a cash back debit card is an ideal way to earn cash back on your spending. Also, for people with weakness of overspending, a cash back debit card can not only offer you rewards but also help you to limit your spending.
Although a cash back debit card may not offer you the same benefits as a rewards card, it can help you limit your spending, making it a great choice for people with poor credit history. So, it can be a valuable addition to your wallet. However, when you opt for a debit card with cash back, make sure you choose the one that offers you the highest cash back and considers any other benefits too.
How do cash back debit cards work?
When you use your debit card, whether for shopping or paying your electricity bills, your bank logs your transaction details, including how much you have spent, when you spent the money, and which shop you were in. Your bank provider will use this information, especially if you have a cash back debit card, to give you rewards in the form of cash back into your account.
Usually, you will get a percentage of the money you spend. The amount of cash back you get will depend on which shop or website you use. For instance, if you shop from a store that partners with your bank, you may get a higher amount of cash back. However, you will get some cash back even if you shop at other stores, but at a lower rate.
Various banks have also extended their cash back offers to other account transactions. This means you can earn cash back if you use your debit card to pay your utility bills or property tax. However, remember that you have to pay a monthly fee for a cash back debit card account. So, you have to add up all the cash back transactions and subtract the monthly fee to see your earnings from cash back.
The biggest advantage of having a cash back debit card is when you have applied for an auto loan and have an outstanding debt. You can use this cash back to get out of auto debt faster.
The bottom line
Cash back debit cards don’t offer as many perks and benefits as credit cards. However, they can be a great choice if you have a poor credit history or you simply want to make payments from your checking account. So, if you are looking at the option of getting a cash back debit card, make sure you compare the cash back offered by different providers and choose the one that offers the highest rate of rewards and benefits.
