Add miles while deducting from your checking account
Air mile debit cards
are ready for take off.
You read that right -- debit cards that offer air miles.
If you're not familiar with them, a debit card, unlike a credit
card in which you create a debt to be paid, yanks the payment from
your checking account at the time of purchase.
But they do operate like a credit card when it comes to earning
air miles for each purchase you make.
This new kind of rewards card is attempting to follow in the footsteps
of all those wildly popular air mile credit cards. There are hundreds
of these credit cards available from banks all over the country.
Earn while you spend?
People just love charging their way to free air fare. They'll charge
everything from college tuition to office equipment, all for that
free flight to their dream destination.
And now some of the nations's largest banks are letting their debit
card customers get into the act.
Chase Manhattan, U.S. Bancorp, Citibank and Bank of America are
among the banks that let customers earn air miles with debit card
Chase launched its Chase/Continental
Airlines Banking Card in 1999. Customers earn one OnePass mile
for every $2 they spend on the card, which comes with a $30 annual
Chase customers earn miles on both PIN-based and signature-based
debit card purchases. No miles are earned on ATM withdrawals or
for receiving cash back from a grocer or another merchant.
It would take a pretty ambitious Chase shopper to earn a free
trip on debit card purchases alone. You'd have to spend $40,000
to earn 20,000 OnePass miles. That's a lot of trips to the grocery
Because of this, lots of debit card customers earn miles from other
Continental partners as well, including Continental Airlines platinum
and classic credit cards from Chase.
"It becomes a complement to OnePass miles they may be earning from
other programs," says Ben Colvin, vice president for the retail
consumer segment at Chase.
Give 'em what they want
Setting up an air-miles rewards program for Chase debit card customers
was something of a no-brainer.
"Any time you ask customers what's important to them, frequent
flier miles is always what they say," Colvin says.
Chase has been offering debit cards since 1996. It launched its
first debit rewards program, called Leisure Rewards, in 1998. With
Leisure Rewards, Chase customers earn one point for every $1 spent
with the card. The points can be redeemed for everything from cooking
classes to flight lessons. Leisure Rewards charges a $30 annual
Colvin believes that as more people get in the habit of paying
with debit cards, more banks will start rolling out rewards programs.
"Over time, as customers become more familiar with debit and
its advantages, you'll see more and more issuers following our lead,"
Minneapolis-based U.S. Bank did just that in March 2001 when it
launched its WorldPerks
Check Card in conjunction with Northwest Airlines. Customers
earn one air mile for every $2 spent on the card, which comes with
a $20 annual fee.
There's a small hitch. U.S. Bank customers only earn air miles
on signature-based debit card purchases. PIN-based purchases don't
count. So people that prefer to pay by punching in their personal
identification numbers are out of luck.
The same goes for Citibank customers that sign on for Citibank
AAdvantage Debit Cards. Only signature-based purchases earn
American Airline AAdvantage miles. PIN-based purchases won't earn
you a single air mile.
Citibank customers who sign on for a basic card pay a $30 annual
fee and earn one American Airline Advantage mile for every $2 in
signature-based purchases made on the card. Premium card customers
pay a $65 annual fee and earn one air mile for every $1 in signature-based
Bank of America jumped into the air mile debit business in fall
2001 when it introduced US
Airways Dividend Miles Visa Check Card. For a $30 annual fee,
you can earn one air mile for every $2 of purchases made with the
card and one mile for every $1 of US Airways purchases.
MegaRewards making its mark
Another bank tapping into the popular lure of frequent flier miles
is Charter One in Cleveland. Its MegaRewards
program for debit card customers has free, round-trip air fare on
any airline as a top reward. Other rewards include items from portable
DVD players to magazine subscriptions to gift certificates.
Launched in December 2000, MegaRewards has been a booming success.
Customers earn one point for each dollar spent on signature-based
debit card purchases.
The number of debit card transactions made by Charter One customers
in the first half of 2001 was up 56 percent from 2000, according
to Mark Grossi, executive vice president at Charter One. The number
of dollars Charter One customers spent with debit cards was up 54
"That's a lot of stuff," Grossi says.
"That's a huge growth rate."
Debit cards and debit rewards programs appeal to people who are
debt-adverse and who like the immediacy of paying by debit. These
are pay-as-they-go kind of folks.
"A lot of people feel good about the notion
that when they pay for an item with a debit card, it's paid for,"
Grossi says. "There's not a big bill coming."
Perform a preflight checklist
As with any rewards program, consumer experts urge people to take
a good hard look at the details of an air mile debit card before
- Is there a fee?
- Is the award something I really want?
- How long do the points or miles last?
- How long will it take me to earn my rewards?
- Will I bust my budget doing so?
Don't forget there's no float with debit cards. Purchases are pulled
almost immediately from your checking account. So it's important
not to get carried away with your spending.
"People need to look at their intentions," says Paul
Richard, executive director of the Institute
of Consumer Financial Education in San Diego.
"Are they spending and buying because they really need these
things, or are they spending and buying so they can get these bonuses?
"The main focus should always be your own
financial well-being and discipline. These other things should be