By Shawn Conahan, CRO, Wildfire Systems
The direction of interest rates in 2025 remains uncertain, but one trend is becoming increasingly clear: more consumers are opting for debit cards over credit cards to avoid continuing to accumulate high-interest debt. With the national average APR on credit cards at 20.12% as of January 2025, carrying a credit card balance is much more expensive these days. This is prompting many consumers to shift toward debit when they can.
The rise of debit card usage
Recent data confirms the shift to debit. The 2024 Diary of Consumer Payment Choice from the Federal Reserve reports that debit cards accounted for 30% of monthly payments, just behind credit cards at 32%. The Pulse Network 2024 Debit Issuer Study noted that in 2024, debit card holders performed 34.6 transactions/month – up 11% vs. 2023.
As consumers become more overleveraged, with credit card balances and defaults at all-time highs, they are looking for ways to rein in their debt and spend more smartly. Debit cards provide a way to spend only what they can genuinely afford while avoiding accruing interest. As Javelin notes, consumers increasingly prefer attaching debit cards to their digital wallets.
This increase in debit usage presents an opportunity for banks. While debit card interchange fees are lower than credit card fees due to regulations like the Durbin Amendment, debit’s high transaction volume can make it a meaningful revenue stream for a bank/issuer. So, financial institutions are finding new ways to incentivize debit card usage by adding debit incentives and perks traditionally associated with credit cards.
How banks are enhancing debit card rewards
To encourage debit card usage, banks are implementing various incentives, including cashback rewards, subscription fee reimbursements, gamified spending rewards, and environmental or social impact initiatives. Examples include:
- Merchant-Funded Cashback Rewards: Some banks are collaborating with retailers to offer cashback for debit card transactions. Regions Bank’s Regions Offers program allows customers to earn cashback when they use their debit card at participating merchants.
- Category-Based Cashback Incentives: Debit card cashback programs that reward spending in specific categories are also available. PayPal allows customers to pick a specific category each month to earn 5% cashback on PayPal Debit Mastercard purchases.
- Subscription Fee Reimbursement: For its highest-tier debit card banking customers, Citibank offers up to $200/year in subscription fee rebates, such as for streaming platforms or fitness apps.
- Gamified Spending Rewards: Some fintechs are experimenting with gamified debit card rewards, where customers earn bonuses or points for frequent debit card usage. US fintech Current is one of the few financial services providers offering a debit-card rewards program. With their Build program, Current customers earn points redeemable for cash for their debit purchases at restaurants and grocery stores. At the same time, they build their credit score the more they use their debit card, offering an even greater incentive for debit card use.
- Social & Environmental Impact Initiatives: Financial institutions are also tying debit card usage to environmental or social impact efforts. As one example, Aspiration Bank’s “Plant Your Change” program allows customers to round up purchases to the nearest dollar. Aspiration then applies the round-ups towards planting trees, which appeals to environmentally-conscious consumers.
The competitive landscape and future outlook
Traditionally, credit cards dominated the rewards space, offering consumers points, miles, and high cashback rates. However, banks realize that debit is gaining appeal due to its budgeting advantages – helping customers only spend what they have.
As the future of interchange remains somewhat uncertain, banks continue looking for other ways to add incremental revenue and preserve customer relationships. With high transaction volumes and a relative lack of rewards program penetration, debit cards are a strong prospective candidate for banks to tie in loyalty- and revenue-driving rewards programs.
Banks should aim to find ways to add rewards offerings that also deliver value for their customers – while also meeting the high expectations of the modern consumer for frictionless experiences. Whether incentivizing debit card usage through cashback rewards, gamification, or social impact initiatives, financial institutions can drive more customer loyalty through easy-to-access, meaningful customer benefits.
About the author
At Wildfire, Shawn Conahan develops strategic partnerships with major finance, banking, and fintech companies to enable the creation of new revenue streams and modernizing their customer experience to position them competitively for the future of banking and money. He has been an entrepreneur, senior executive and investor in the wireless, technology and Internet industries for over 15 years, having previously built and sold three companies. His industry experience ranges from digital media to wireless technology to big data, where the common thread has been building platforms with broad applicability.
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