PerkStreet: Get the Most from Your Rewards Checking Account

If you're watching the banking industry closely, you have probably noticed that rewards checking seems to be going the way of the Dodo. This is concerning for those who know how valuable rewards checking can be, but it has come as no surprise to people in the industry (myself included).

The Fed is currently debating a regulation that could seriously reduce the amount of money banks earn every time one of the credit and debit cards they issue are swiped. Since rewards checking accounts historically involve sharing some of the profit generated from these transactions -- called interchange fees -- many banks have canceled their rewards checking accounts in preparation for a potential regulatory change.

PNC Bank and Chase Bank have both announced they're phasing out debit rewards on some level, though customers at those institutions don't need to find new accounts immediately; both will keep honoring their rewards deals for a while, at least. If you're lucky enough to be in their programs, you'll continue to earn rewards for a bit, and if you know how to sniff out a good deal, you can still find debit rewards checking accounts that will earn you a lot.

Why? The basic logic goes like this: If you're a typical American you probably have about half a paycheck in your checking account on average over the course of a year. You get paid and then right before you get paid again, you spend almost all of your money or move it out of your checking account. Earning interest on checking accounts seems silly when you realize how little money is in there to earn interest on.

On the other hand, earning cash back rewards like the ones my company, PerkStreet Financial, offers over the course of a year every time you swipe your debit card can really add up. If you think about it, you probably spend most of your annual salary on your debit card, so earning 2% cash back on all those purchases means earning 2% more each year.

Here are some quick tips on shopping for debit rewards:

1. Watch for Barriers to Redemption. Blackout dates are the most common "Gotcha!" when it comes to travel rewards, but pay attention to the fine print when it comes to redeeming other kinds of rewards, too.


2. Make Sure Your Earning Rate is Competitive. Some rewards programs flash vacations and new televisions in front of you to get you to sign up. These can be tempting, but look into what it will take for you to earn enough points to get them. Understanding how quickly you'll earn will tell you a lot about the total value of the account.


3. Watch for Redemption and Shipping Fees. Before you sign up, make sure you aren't charged a shipping or "redemption" fee. Like when you shop online, it does cost a bank money to send you things, but make sure that the costs are at least reasonable if the bank doesn't eat those costs outright.


4. Pay Attention to Earning Caps. Many rewards cards cap annual earning. Bank of America even does this on their popular Keep the Change program, despite the fact that their earning "rate" is only a fraction of some others. If you're going to hit the cap, it doesn't matter if you're earning 1% cash back or 20% cash back.


5. Make Sure the Rewards are Useful. Some programs let you earn points that you can only redeem in their "catalog." Sure, everyone loves a good blanket with sleeves, but how is that helping you get more out of your money? Some even have fine print that allows the company to substitute things you order for "like items." That's not helping anyone. Look for rewards that come in a form you can use, like deposits back into your account or gift cards.


6. Watch for Spending Limits. This is a new one: A few banks have recently made announcements about potentially capping the amount of money you can spend with debit cards they issue. These limits could end up applying to individual transactions or monthly totals. No matter what your rewards program is like, if you can't spend money with the card, you typically can't earn rewards.

A little due diligence online for customer reviews, or asking the question over Twitter, can yield some pretty helpful results when it comes to making sure you can get a lot from your debit rewards. You should also call the bank to get answers before you decide; being able to get detailed information from a friendly customer service representative should be a prerequisite for any kind of account!

Kyle Psaty works for PerkStreet Financial, which offers unlimited cash back up to 2% on a debit card. He edits the PerkStreet Blog, which offers daily tips and tricks for saving money and better budgeting.