Mirroring what previously was known about debit card rewards, consumer website Bankrate.com has found through its own recent research that the majority of programs require a signature-based transaction to receive an incentive. How that changes after the Federal Reserve Board sets debit card interchange rates remains to be seen, and the survey data could serve as a benchmark, Bankrate.com says.

Bankrate.com in June examined 40 debit card rewards programs and found that 65% gave rewards only on signature purchases, while 30% did so for both signature and PIN-debit transactions. The other 5% of programs only offered merchant-funded rewards.

The range for rewards on signature-debit transactions was between 0.2% and 3% of the sale; the range for PIN-debit transactions was between 0.1% and 0.5%.

Half of the programs surveyed charged no annual fee. For those programs that did charge, Bankrate.com found fees ranging from $12 to $55 per year, with the most common annual fee being $25.

Debit card rewards are in store for a major overhaul now that Congress has passed the financial reform bill (see story), observers predict.  The legislation includes an interchange amendment that requires the Fed to set debit card rates that are “reasonable and proportional” to the cost of processing the transactions.

Banks use part of their interchange income to fund card rewards.

Bankrate conducted the survey with an eye toward the legislation, says Greg McBride, a Bankrate.com financial analyst. “This survey gives us the before picture, before any changes take place,” he tells PaymentsSource.

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