What Mileage-Earning Debit Cards are Left, and How You Can Take Advantage of Them?

Bank of America Appears to Be Getting Out of the Mileage-Earning Debit Card Game

Frequent Miler reports that Bank of America will end the Alaska Airlines debit card program on May 31.

Separately, Hack My Trip suggested that this Sunday may be the last day to apply for one. Of course if you get the card you’ll only have a little more than six months to take advantage of it.

And it’s hardly the most rewarding product to begin with. You earn 1 mile for every two dollars spent.

But having options to earn miles via a debit card is valuable because there are a whole bunch of transactions for which you can use a debit card but not a credit card.

Why Most Banks No Longer Offer Mileage-Earning Debit Cards

The Durbin Amendment to Dodd-Frank financial reform legislation limited the fees that banks can charge for debit transactions. The Federal Reserve adopted a rule which capped the fees at 21 cents plus 0.05% of the transaction. There’s currently litigation arguing that these fees are too high.

Whereas credit card processing fees can exceed 3% even, and thus banks want to incentivize those transactions — they are profitable, and so rebating some of the fees in the form of cash back or miles makes sense — debit card transactions no longer are. Debit transactions no longer serve as a source of profit that banks derive from checking account customers, and banks have responded by increasing the hurdles necessary to get free checking accounts even (such as higher minimum balances, bigger direct deposits, etc) or have applied fees across-the-board.

Checking accounts are less profitable, and debit transactions no longer drive profits, at least for those banks which are covered by the rules. Generally small credit unions are exempt, and some prepaid products and innovative products like Bluebird are exempt. Exemption from the Durbin Amendment explains how Bluebird is able to offer rich services fee-free that traditional banks no longer can on their debit and checking products.

Mileage-Earning Debit Cards Are Really Valuable

Mileage-earning debit cards that do exist offer fantastic opportunities to earn miles. Precisely because the processing costs are limited, they can be used for all sorts of transactions that credit cards can’t be.

Paying taxes with a credit card can cost ~ 2% of the amount of your tax bills, which pretty much negates the value of the rewards you’ll earn (although this can still be useful to meet minimum spend requirements or earn threshold bonsues or status from those cards).

But paying taxes via debit card can cost as little as $3 per transaction so the rewards that come via the debit card are nearly free.

Payment processors like Square Cash will also let you transfer money fee-free via a debit card, which lets you earn rewards for your payments while giving money to a spouse, friend or relative (who might even give you cash, too!).

And Bluebird itself now lets you fund online for free with a debit card in addition to debit card funding in-store at Walmart.

Which Mileage-Earning Debit Cards are Left?

I’m aware of the following rewards debit cards, the first two are the most valuable and the first one is the only one that I have and use. I’m certain there are others and would love to hear about your experiences in the comments.

  • Suntrust bank offers a Delta co-branded debit card that earns a full one mile per dollar, and which can be opened online for free. Some people find Suntrust’s fraud policies problematic. I have had no problem with them, though I benefit by having an address in a state which Suntrust operates. Some folks outside of Suntrust states seem to have more challenges with them.

  • The Paypal debit card earns 1% cash back on your purchases. If you don’t want to keep cash balances in paypal, I believe the debit card can pull funds from a linked bank account.

  • UFB direct offers a debit card that earns 1 American Airlines mile per $2 spent, there is a $1,500 daily transaction limit (so 750 miles per day and making this not useful for large tax payments), and a cap of 120,000 miles per year.

  • Bank of Hawaii offers a debit card that earns 1 Hawaiian mile for every $2 spent. The card costs $3 per month and caps earning at 2500 miles per month.

Do you still have a mileage-earning debit card? How do you use it to maximize your miles?


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I think you mean to say debit rather than credit in this sentence: “But paying taxes via credit card can cost as little as $3 per transaction so the rewards that come via the debit card are nearly free.”

  2. I believe Square Cash has blocked PayPal debit cards from being used. I was using it the last 2 weeks but as of yesterday, Square Cash would not allow it.

  3. @Paul from the above post: “Frequent Miler reports that Bank of America will end the Alaska Airlines debit card program on May 31.”

  4. I’ve been using the Alaska Air BofA debit card since its inception – around 1998 I believe. Usage on the card helped me keep Alaska miles alive (although I’m not sure whether they enforced the expiration policy). Assuming the report is true, it was good while it lasted.

  5. @AJ, you need a business or premier PayPal account and then you can request a debit card. It’s not a credit card so there is no credit pull.

  6. Best kept secret in debit cards is the Nordstrom Bank Debit card. It’s not advertised and is a different product than their store-only credit & debit card that links to outside banks. It’s a free, interest bearing checking account with great customer service and a card that gets you Nordstrom points for all debit purchases, in the store and outside. 2,000 points = $20 in Nordstrom notes

  7. Besides paying for taxes or maybe buying a car, where else can you use the debit card that you couldn’t just use a credit card instead? I’m assuming that pulling money out of the ATM doesn’t give you any points.

  8. The Nordstrom Bank card can be used outside of Nordstrom (@TomC was confusing it with another card), but the Nordstrom Bank is closing on December 15. Thanks to @AG for the tip…got some free clothes out of it.

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