Banks to strip debit card rewards; What next?

Last week, "The Early Show" reported that banks are raising ATM fees by as much as $5 in some cases. Now, some banks are stripping consumers of their debit card rewards. Chase is going to pull the plug on most debit card rewards programs starting July.

CBS News Business and Economics correspondent Rebecca Jarvis tells "Early Show" co-anchor Chris Wragge where you can still get rewards and why banks are taking these drastic measures.

"It's the same thing we've been talking about. The banks say they're getting over-regulated. It's eating into their profits and they say they've got to make back that money in some way. Last week, it was through new ATM fees. This week it's taking away rewards," Jarvis says.

As of now, what companies are taking away our rewards?

"Like you said, Chase is the big one. They are sending out letters this week letting customers know that as of July 19 they're going to take away rewards on those debit cards," Jarvis explains. "Also for their Continental and United debit card holders, their rewards go away July 12. And on top of that, that free checking that comes with those cards is going to go away April 1."

Will other banks jump on board?

"It is a strong likely that they will. Right now they're telling me they are not doing it, but are evaluating opportunities in the future. And if JP Morgan does it they're likely to follow," she adds.

Is it better for other banks to sit back and see what kind of backlash this will have? Wragge points out that getting rid of debit card rewards would be enough for people to want to change banks.

"Changing banks is not an easy ordeal," Jarvis says. "What you have is these banks - they kind of know that they've got you, and it takes a lot of time and effort to change banks."

So if you can't get these rewards on your debit card anymore, where can people go to receive some of these incentives?

According to Jarvis, hotels and airlines might be your best bet when it comes to rewards.

"Hotels frequently have rewards programs through the hotel itself. Frequent flyer miles. We all know you sign up with an airline you tend to travel on frequently; they'll give you rewards as well... Many credit cards have rewards programs, but there are caveats to signing up for those. Because, you know, a credit card is very different from a debit card."

While rewards credit cards may be people's only other option, for some, there are fees to consider. "And if those fees outweigh the rewards that you take home at the end of the year, well it doesn't really make sense to sign up for them," Jarvis adds.

"In addition to that, you don't want to be pushed to overspend. You know, these programs, with a credit card, if you think I'm getting more rewards so I'm going to swipe my credit card everywhere. Well guess what? That's bad business for you," she says. "And also, in terms of finding a great one for yourself, bankrate.com is a wonderful website. They actually have a portion of the website dedicated fully to credit cards. You can look for rewards credit cards. Look for the ones that are no fee and also have a low APR."

  • CBS News Staff

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