Consumers Suggest Issuers Pump Up the Debit Rewards

  For many years, consumers have earned discounts on gasoline purchases for using certain credit card brands. Now, many consumers want debit card issuers to offer similar fuel-discount rewards.
  New research by Synergistics Research Corp., an Atlanta-based research company, suggest offering popular rewards, such as gas discounts, would help to pump up debit volumes.
  The summer survey of 1,000 consumers, the results of which were released in late October, found that rewards associated with fuel purchases are the leading type of debit rewards consumers would prefer from their issuers. Thirty-nine percent of the survey respondents preferred gas discounts as a debit reward. That compares with 36% who identified cash rebates as a top preference, and 28% who preferred coupons and merchandise.
  All of those preferences exceeded the 26% of respondents who said they now earn any debit rewards, according to the Synergistics survey.
  Half of the survey respondents said they would use their debit cards more often if rewards were tied to card use. William H. McCracken, Synergistics CEO, agrees that offering a discount for using debit cards for gas purchases would increase card use.
  It is not just recent rises in gas prices that are sparking consumer interest in fuel-related rewards, says McCracken, noting that consumers have been aware of credit card gas rewards for years.
  "Gas cards are how rewards started," he says.
  Though many consumers still pay for gas with cash, displacing cash payments with debit cards for gas has been difficult to sell, McCracken says. Tying debit card use to fuel discounts, though, could overcome that problem, he says.
  Janet Yao, managing director of survey research at the American Bankers Association, says the time seems ripe for debit rewards to be used to move consumers away from cash. Transaction volume probably could grow as issuers start offering reward programs tied to high-volume cash purchases, such as gas, she says.
  Some observers, however, believe prepaid debit cards designed for unbanked individuals have a better chance of displacing cash payments than do debit cards tied to individual checking accounts.
  Role of Unbanked
  Unbanked consumers and individuals who do not have a credit card account for a large share of cash payments, says Kurt Johnson, vice president of Houston-based PreCash Inc. PreCash for several years has offered a service in which bill payments made using cash at retail locations are transformed into electronic payments using a payment terminal.
  Johnson says he believes that users of prepaid debit cards are mostly unbanked consumers who pay primarily using cash but who want some of the benefits of using a debit card, including the ability to do Web-based purchasing. He foresees the use of rewards, such as discounts on gasoline purchases, being incorporated into prepaid debit programs to make the purchase of prepaid debit cards more appealing to consumers who mostly use cash for payments.
  "It is really about striking the right type of reward," Johnson says.
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