Cash-back debit cards make it possible for consumers to earn rewards on their everyday purchases without the threat of credit card debt. But how do cash-back debit cards work, and are they a good alternative to a rewards credit card? Here's what you should consider before opening an account.

What Are Cash-Back Debit Cards?

As their name suggests, cash-back debit cards (also known as reward debit cards) offer rewards for eligible purchases in the form of a percentage of your purchase amount. There are quite a few cards that offer 1% back on all eligible purchases, while others may provide 10% back or more at specific merchants.

But unlike cash-back credit cards, cash-back debit cards are linked to a checking account—usually from an online bank—rather than a revolving line of credit. As a result, there's no risk of getting into high-interest debt. You can only spend what you have in the checking account (aside from overdrafts).

So, how does cash back work on a debit card? It’s simple: You make purchases with eligible merchants, and your cash-back rewards are typically deposited into your checking account. With other cards, the cash back may be deposited into a separate rewards account, and you’ll need to redeem it; in those cases, you may be able to set up automatic redemptions.

Benefits of Cash-Back Debit Cards

There are many reasons to consider getting a checking account with a cash-back debit card. Here are some of the advantages to consider:

• Can help limit debt: If you've struggled with overspending in the past, a cash-back debit card allows you to earn rewards on your everyday spending without racking up a credit card balance. While you may be able to overdraw your account, depending on your card and preferences, the impact likely won't be as significant as carrying a lot of high-interest debt.
• Low costs: Many cash-back debit cards don't charge annual or even monthly fees, so you don't have to worry about spending a certain amount just to make up for the cost of the account. There's also no interest, and you can generally avoid other account fees if you use them responsibly.
• Other features: Checking accounts that offer cash-back debit cards may also offer other valuable features, such as ATM fee reimbursements, waived overdraft fees, high annual percentage yields (APYs), and more.

How to Get Cash-Back Debit Cards

Cash-back debit cards are mostly offered by online banks to accompany their checking accounts, so you’ll simply need to apply for the right checking account. Here are some simple steps you can follow to find the best card for you.

• Research options online and compare them based on reward rates, requirements, limitations, and other account features.
• Apply for the checking account that comes with the cash-back debit card you want.
• Provide basic information about yourself to open the bank account—you’ll often need to provide a copy of your driver's license.
• Some checking accounts have no minimum opening deposits, while in other cases you may need to provide a $25 or $100 opening deposit.
• Once you've opened the account, you should receive the debit card within a week or two.

Best Cash-Back Debit Cards

Debit Card	Cash-Back Rate	Monthly Fee	ATM Network
Best for Low Balances	1% on all purchases up to $3,000 spent per month	$0	Allpoint; MoneyPass
Best for Direct Deposit	1% on all purchases with $2,500 in direct deposits or $2,500 average daily balance	$0	MoneyPass; SUM
Best for Heavy Debit Users	1% on all signature-based purchases up to $2,500 spent per month	$0	Unlimited domestic ATM fee reimbursement
Best for Military Individuals & Families	10 cents per debit transaction	$0	USAA; USAA-preferred ATMs

Cash-Back Debit Cards vs. Rewards Credit Cards

Both cash-back debit cards and rewards credit cards allow you to get value on eligible purchases you make with your account. But that's where the similarities end. Here are the main ways in which the two differ:

• Credit check: When you apply for a credit card, the card issuer will typically run a hard inquiry on your credit reports to determine your eligibility. That inquiry can potentially cause a small dip in your credit score, albeit temporarily. In contrast, cash-back debit cards don't require a credit check.
• Building credit: While you don't need to undergo a credit check when applying for a cash-back debit card, using one won't help you build credit. In contrast, rewards credit cards can help you build credit with responsible use.
• Costs: Credit cards often charge high interest rates, though you can typically avoid interest if you pay your balance in full every month. Some rewards credit cards may also charge annual fees, as well as fees for balance transfers, cash advances, foreign transactions, and more. Cash-back debit cards don't charge interest, and they also typically don't charge annual or monthly fees. But you may be charged fees for overdrafts, foreign transactions, wire transfers, and other account features.
• Reward rates: With a cash-back debit card, you can typically expect to earn up to 1% back on everything—though some may offer more—or a higher rewards rate when you shop with certain merchants. With rewards credit cards, on the other hand, you can earn up to 2% back on everything in some cases, or earn bonus rewards in certain spending categories, like groceries. Overall, you can earn a lot more rewards with a credit card.
• Reward caps and requirements: Reward credit cards typically offer at least 1% back on every purchase you make, not just with select retailers. And while some cards may set limits on how much you can earn with certain bonus categories, you can typically still earn unlimited rewards at the card's base rewards rate. Additionally, you won't need to meet certain balance or direct deposit requirements to qualify to earn cash back on a credit card.

Ultimately, the decision between a rewards credit card and a cash-back debit card may boil down to whether or not you can use a credit card responsibly and avoid interest charges. If you can, a credit card may pose no threat to your budget. But if you've had trouble with credit card debt in the past, or you simply want to avoid the potential danger, a cash-back debit card can be a good alternative.

How to Choose the Right Cash-Back Debit Card

As you shop around and compare your options, here are some features to keep in mind to determine which cash-back debit card is the right one for you:

• Cash-back rates: How much does the card offer for your purchases? Does the card offer cash back on every eligible purchase, or can you only earn rewards with select merchants? 
• Limitations: Do you need to meet certain requirements to qualify for cash back? Are there caps on how much you can earn each month, and how likely are you to max out that cap every month?
• Costs and fees: What kinds of fees does the account charge, and how might those fees impact you? Does the account waive standard fees like overdraft charges?
• ATM availability: How many ATMs are in the bank's network, and how easy will it be to access cash when you need it? Does the bank reimburse you for ATM withdrawal fees?
• Bank's quality of service: Does the bank have good customer reviews that you can easily find online? Is it a well-known bank with a good track record, or is it a new bank without a lot of experience?
• Other products and services: If you like to have all of your finances under one proverbial roof, what other types of financial products and services does the bank offer, so you don't have to use multiple financial institutions?

Think carefully about these and other factors that are important to you. With so many options available, there's no single best cash-back debit card out there for everyone, so knowing what matters most to you is crucial.