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Discover Brings Back Debit Card Rewards

Discover logoIn early 2011, many big banks, led by Chase and Wells Fargo, ended their debit card rewards programs when they were no longer permitted to charge overdraft fees without the customer’s consent.

Now Discover Financial Services is bringing back debit card rewards. But it’s going one step further: It’s also offering cash back on online bill payments and paper checks.

The company recently rolled out Cashback Checking accounts, which pay customers 10 cents for every debit card purchase, online bill payment or check you write.

Rewards are automatically added to the account holder’s Discover card cash-back bonus balance. There’s no limit on how much you can earn.

To start, Cashback Checking will only be available to a limited number of Discover cardholders by invitation, although the company expects to make it available to all of its existing credit card customers by the end of 2013. A full consumer rollout to non-Discover customers is planned for 2014.

Ten cents on every debit, bill pay and check payment – no matter how small – certainly sounds like a good deal, although it’s not quite as good as using the Discover card itself, at least on larger payments. The basic cash-back reward on Discover credit cards is up to 1%, so you’d earn more than 10 cents on purchases of more than $10.

Then again, you can’t use your Discover card to pay for everything, including your Discover bill.

Now, however, you can earn rewards on just about all of your purchases – except for cash purchases, of course.

In addition to the 10-cent-per-transaction reward, Discover Checking has other great features, including no monthly fees, no minimum balance requirements, free checks and free replacement cards.

There’s also a smartphone application that lets customers deposit checks and pay bills on their mobile devices.

Discover isn’t the only bank that still offers debit rewards, but Discover’s deal is easy to understand, covers more types of payments and is generally cheaper.

For example, the PerkStreet Financial Debit MasterCard lets you earn up to 1% back on debit card purchases and up to 2% on online purchases at participating retailers like Amazon, iTunes, Target and Walmart.

That’s better than Discover’s deal. But it doesn’t pay rewards on check and online bill payments.

While Discover offers free checks, PerkStreet only gives you your first book of checks free and then charges for subsequent checks. Fees vary on how plain or fancy you want your checks.

PerkStreet also doesn’t charge any up-front fees, like Discover, but it does levy a lot of nuisance fees. For example, there’s a $4.50 per month inactivity fee if you don’t make at least one transaction per month.

Discover doesn’t have that.

Discover charges an insufficient funds fee of $30 up to once per day. PerkStreet charges way more: $32 up to three times per day.

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