If you are an average American, it is likely that you not only own a credit card that offers rewards for spending a certain amount, but are using it on a regular basis. According to StatisticBrain.com’s 2012 credit-related statistics, which include figures collected from organizations such as the Federal Reserve, the Joint Economic Committee, Sallie Mae and TransUnion, the total U.S. credit debt is $793.1 billion. Additionally, 13.9 percent of our income goes to paying back our debt.
Credit card companies try incentivizing their customers with rewards such as travel points and by offering a small percentage of cash back, all in an effort to get them to use their cards frequently. However, the truth is that the interest rate on a credit card often exceeds the cash back amount. This means that unless you are using your credit line for an emergency or for purchases well within your means, the debt is simply not worth it.
While a credit card can be used as a means for accumulating reward points, not to mention building a good credit score, you also do not want to get into financial trouble. If you are attracted to the features a credit card offers, then use the card solely for small purchases you can pay back immediately. For the majority of your spending, however, consider using a special debit card instead.
Rather than opening a credit card and getting cash back on something you already owe, think of the benefits of making extra money on cash you already have, which is possible with a debit card. Certain debit card issuers offer cash back on your purchases, as well as other rewards. While more options were available before debit card fee restriction laws were passed, a few card issuers still provide exciting incentives and perks.
To find the debit card program that is right for you, read on and learn about the most legit and economical options out there.
PayPal Debit Card
Setting up a PayPal account that comes with a debit MasterCard allows you to link it with your existing checking account. This way, you do not have to add money into the PayPal account; instead, you maintain your regular bank account balance. When you swipe the debit card, the money will be taken from your linked account if you set it up as such.
The main benefit of this card is that you will earn 1 percent cash back for all purchases you sign for without having to worry about accumulating debt. Other eligible purchases include those from online merchants and purchases via phone or catalog, so make sure to keep this card in mind for holiday gift shopping. Each month, PayPal will refund your cash, which will automatically hit your account.
PayPal allows you to manage the account online, where there are built-in security features to ensure your bank account will be protected. While the card mitigates the risk of accumulating debt, charges can take a couple days to hit your account. PayPal does not keep track of your separate checking account balance, so you can still accumulate overdraft fees. However, you can get the PayPal smartphone app to help you avoid such fees; this app will alert you after each purchase, making balance management easier.
PerkStreet Financial Cash Back Rewards Debit Card
PerkStreet Financial differentiates itself with the slogan “Credit card benefits without the debt.” Similar to a credit card in many ways, the company’s cash back rewards debit card offers perks such as 1 percent cash back on all purchases and 2 percent on online purchases. Redemption is in the form of either regular cash back or gift cards, depending on where and how you are using your card. You only need $25 to open a debit card account with PerkStreet Financial, and the firm’s website makes it easy.
Only sign up for a debit card account with PerkStreet if you plan to use it as your primary checking account, as you will be charged $4 for every month of inactivity. While MyBankTracker.com reviewers give the card four out of five stars, some users complain that checks can take a few days to hit. Applying for and setting up your account online takes only 10 minutes, but read the terms and agreement in full before signing up so you’re aware of the rules associated with having the account.
Bank of America Keep the Change Program and BankAmeriDeals™
Through Bank of America’s Keep the Change program, anything you spend using your debit card will be rounded up to the nearest whole dollar, and the balance put into your savings account. So, if you spend $3.50 on a cup of coffee, the program will round that figure up to $4, and 50 cents will be added to your savings. According to its website, Bank of America will match 100 percent of your Keep the Change savings for the first three months, up to $250. Each year, you will earn 5 percent cash back on your savings.
With BankAmeriDeals, you select vendors via your online banking page and get cash back when you spend. Practical options include cash back supermarket and cellphone deals. Be careful with this option, though. Some vendors such as Starbucks and TurboTax are more commonly used, but you don’t want to get sucked in by other options. Just because there is a cash back deal for an online clothing store, or a restaurant you hardly go to, doesn’t mean you should use it.
While credit cards can be your savior in the event of an emergency and help you build credit, do not be fooled by their perks and rewards. The aforementioned debit card options provide you the same incentives to spend while restricting you from spending too much. If you do not have a credit card, test your discipline with a debit card first. And if you do have a credit card, try using it only to pay off something small, such as a utility bill, and earn rewards through one of the debit card options instead.