In this Bank Monitor research report, we look at the current state of checking account and debit card-based rewards programs, investigating the benefits they offer to potential and existing customers, as well as the rate of return earned by clients. In particular, we focused on the following questions:

• Is the program attached to a particular checking account, or is it attached to an optional debit card?
• What are the nominal and real rates of return offered by each rewards program?
• Does the rewards program feature an initial-use or account opening bonus?
• Are users charged a monthly or annual fee to be enrolled in a rewards option?

Overall, we looked at 31 checking rewards programs from a total of 13 banks. Three banks offered the lion’s share of rewards options between them, providing 54% of all options in this report. Ten of the different programs currently available are co-branded airline debit cards, a rewards option that almost always carries an annual fee.

One thing that clearly separates different rewards products is whether or not they offer rewards earnings on both Signature- and PIN-based purchases. Currently, only 37.5% of the available checking rewards products offer points on both types of purchases, with only a handful offering equal points or miles for both transaction types.

Among the 14 self-branded rewards options available to checking account holders, the Real rate of Return varied from 0.2% to 1.0%. Though the highest-priced checking rewards program generally netted the highest Real Return, a number of fee-free cards also offered competitive rates. For both self-branded and airline-related checking rewards, initial bonus earnings have become an important perk for enticing prospects to open new accounts. In total, 61% of rewards options include bonus points and miles for new account holders, with several offering secondary bonuses on the anniversary of an account opening.

Segment: Banking
Publication date: Friday, May 28, 2010
# Pages: (39 pages)