5 Options to Morphing Debit Card Rewards

The path debit card rewards are taking Cash back. Gift cards. Travel discounts. The perks of using your debit card had seemed endless. Now, your card's ability to earn points for your everyday spending is shrinking fast.

As institutions around the country notify account holders that using their debit cards will no longer deliver any kind of payoff, account holders are struggling to cope with a new era of less rewarding money management.

If your debit card rewards program already has fallen victim to recent industry changes in rules governing banking, consider these five strategies for moving forward.

Befriend the little guy Big banks may be slamming the door on their debit card rewards programs, but your check card can still pay you back at many community banks and credit unions.

Jane Lundquist, executive vice president at Rockland Trust in Rockland, Mass., describes Rockland Trust's debit rewards program as a win-win situation for the bank and its customers. Account holders who receive paperless statements can earn up to $300 in cash back each year, and the checking account comes with no minimum balance requirements or monthly fees.

A credit union also may provide the solution for your rewards searching.

David Small, spokesman for the National Credit Union Administration in Washington, D.C., says some credit unions operate debit card rewards programs at a loss because of the demand from their members.

Because credit unions are not-for-profit institutions, consumers may find that these outlets will continue to offer debit rewards because they're not as limited by their bottom line, Small says.

"Credit unions are willing to offer products that their members want (and) that do not serve as a revenue generator," Small says.

Play the waiting game Don't make any sudden moves.

Financial institutions recognize your frustration with rising bank fees and shrinking rewards, and they still need your business. As the banking industry settles in to the new norm under recently enacted laws, you may want to hold out for a few months as banks determine how to attract your business.

In some cases, attracting your business may mean passing the buck -- literally.

"We are seeing a shift toward merchant-funded programs," says Greg McBride, CFA, Bankrate's senior financial analyst.

Many of these programs give account holders cash back or points for spending with certain retailers. Outside of new programs, be sure to keep your eyes open for promotional incentives.

Lundquist says the bank sees the ability to continue offering a debit card rewards program as a window of opportunity to attract new customers. In fact, the bank recently launched a marketing initiative offering double cash rewards for debit transactions through the end of 2011.

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