How Online Banking Reward Programs Work

Online banking rewards programs are designed to encourage bank loyalty.
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Imagine that paying your electric bill could help you save toward a new television. It sounds a little crazy, but it's true: Online banking reward programs are an excellent way to turn everyday spending into savings or to help boost your bank account balance.

As online banking grows as an alternative to brick-and-mortar banking -- where a customer writes checks to pay bills and visits a local branch to make deposits -- banks are eager to encourage customers to make the switch. Banks benefit from lower transaction, delivery and administrative costs, while customers enjoy easy access to their accounts, as well as tools that make budgeting and managing money easier.


Online banking reward programs are designed to encourage bank customers to use online services and to reward them for their loyalty. There are two types of online accounts referred to as rewards programs: those that offer points-based reward programs similar to an airline or hotel rewards program, and those that offer higher interest rates to online customers who meet certain requirements.

Popular points-based rewards programs offer incentives to use online services to pay bills and to make both routine and special purchases. Rewards points are given for many different types of expenditures, ranging from household utilities, gas and grocery charges to clothing, electronics, entertainment and travel.

For every dollar spent, account holders accumulate rewards points. Usually, one to two points are awarded for each dollar spent, depending on the terms of the program. Some programs offer double points during promotional periods or for everyday purchases like groceries, gas or fine dining. The rewards points can be used for your choice of cash back as a credit to your account, or air travel, gift cards and certificates, merchandise and more.

Today, most banks with an online presence offer points-based banking rewards programs. Bank of America, Wells Fargo, Wachovia, JPMorgan Chase, and SunTrust are a just a few well-known banks offering these programs.

To learn more about how you can enroll in an online banking rewards program and start earning points for everyday spending, read on.


Enroll in a Rewards Program and Earn Points

Enrolling in an online banking rewards program is easy. Start by meeting the bank's minimum requirements for an online checking account. Then, visit the bank's Web site and look for online enrollment in its rewards program, find a toll-free number to call or visit a branch office.

Once enrolled, you can start earning points right away for everyday purchases. If you have a credit or debit card associated with the account, be sure to ask if you can link the accounts to earn points faster. Some banks offer double points for debit card or recurring purchases, or triple points for purchases made with a credit card.


You may earn even more points for purchases made through a network of merchants, such as Citizens' Bank's Merchant Network or Wachovia's Earn More Mall. These networks include popular retailers like Gap, Best Buy, Office Depot and more. Once you register, you can access these websites through a customized portal, and your purchases will help you accumulate rewards points faster.

Checking your points and redeeming them is as easy as logging into your reward account. You'll be able to see how many points you have available, then browse through an online catalog of rewards and redeem points to claim. For example, if you have 5,500 points, you can redeem points for a $50 gift certificate to Pottery Barn -- or you may choose to save your points and accumulate more to use toward a family cruise.

Some online banking programs may offer "premium" rewards, or awards from luxury retailers or travel partners, or even offer a chance to earn points at a higher rate. A fee may be associated with these types of account, so be sure that your monthly spend and the reward points you may earn justifies the additional fee. If you have to spend significantly more to justify the fee, you should stick to a program that comes free of charge.


Online Rewards Checking: A Smart Strategy for Small Banks

Online banking makes smaller banks accessible to anyone with an Internet connection, whether they are located in Jasper, Ga., or Scottsdale, Ariz. Some small and community banks are now offering rates as high as 6 percent to attract new online customers and larger deposits.

This type of online banking rewards account usually requires one or more of the following: a minimum opening balance, a monthly direct deposit, monthly online bill payment, a minimum number of online transactions per month, debit or credit card usage, and a willingness to switch to electronic monthly statements instead of paper [source:].


Rewards checking accounts benefit both banks and customers. Rewards account holders are twice as profitable to banks as those with regular free checking accounts because they keep higher balances and maintain the account longer, according to BancVue, a company that helps small and community banks set up rewards accounts. Customers can earn much higher yields than when compared to conventional interest-earning checking accounts offered by larger banks [source: SmartMoney].

Banks are also able to make more money on these accounts because customers are required to sign up for direct deposit or electronic statements, helping to save on administrative costs.

To avoid having to pay out too much in interest, there's often a limit to the amount that earns the higher rate of interest: Usually, the limit is $25,000, but some banks will pay the higher interest on deposits of up to $70,000 [Source: SmartMoney].

Rewards checking accounts are a good idea only if your banking habits fit the requirements of the program. If you regularly make 10 to 12 debit card purchases, schedule direct deposits, or maintain a minimum balance, an online rewards account might work for you. Make sure the Federal Deposit Insurance Corporation (FDIC), which covers up to $250,000 for individual accounts, insures your deposits.

Whether you choose a points-based program or one with higher interest rates, online banking rewards programs help you earn a positive return on your hard-earned cash. And who knows, you might even earn enough points to redeem for that camera you've had your eye on or a fabulous family vacation.


Lots More Information

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  • Hernandez, Will. "Customers Get Practical With Rewards Programs." American Banker. July 15, 2009. (January 23, 2010)
  • Todorova, Alexsandra. "As Debit Cards Grow, Rewards Programs Follow." SmartMoney. December 10, 2009. (January 24, 2010)
  • Todorova, Alexsandra. "Banking Perks are Getting Better." Smart Money. May 20, 2005. (January 24, 2010)
  • Todorova, Alexsandra. "How to Earn 6% on Your Cash." Smart Money. November 12, 2009. (January 24, 2010)
  • "Top 100 Redemption List." Wachovia 2009. (January 23, 2010)