By Imani Moise
Debit cards are getting the credit-card treatment.
This year Southwest Airlines, United Airlines and Wyndham Hotels & Resorts launched debit cards that let customers earn points and miles. Venmo's debit card now offers 5% cash back at certain merchants, and Klarna added a premium debit tier that comes with a rose-gold card and access to airport lounges for about $540 a year.
Many of the new debit cards come with fees, and their perks still pale in comparison to credit cards', but the rewards are the most generous seen on debit cards in years.
Debit cards haven't offered rewards because the economics didn't work for banks, but other businesses see things differently.
Co-branded credit cards have become enormous revenue sources for airlines and hotel brands, helping them pad their margins and cope with shifts in travel demand. And financial-technology firms, for their part, are leaning on merchant-funded offers to bulk up their debit rewards and cater to the growing share of consumers who prefer not to use credit.
Debit cards used to be one of the most neglected products in the payments industry, but "now there's a real preference for them," said Eric Schurr, chief strategy officer at Sunrise Banks, the bank behind the Southwest, United and Wyndham cards.
Still, the rewards that come with the new travel debit cards are much humbler than those of even the least generous credit cards from the same companies. The sign-up bonuses are smaller, rewards multipliers are lower and perks such as trip-delay insurance are absent.
For example, United's no-fee credit card offers seven frequent-flier miles for each dollar spent on flights, versus one mile for the airline's new debit version.
These new debit cards also mean opening, and then depositing money into, a new checking account offered by, say, United or Southwest. Those companies worked with Galileo, a fintech middleman that allows consumer brands to offer debit accounts without becoming banks themselves.
While travel credit cards have been a hit with consumers, it is unclear how many will be willing to treat an airline- or hotel-branded account as one of their main checking accounts and route paychecks there, said James Wester, director of research at payments consulting firm Javelin Strategy & Research.
The new travel-branded accounts also charge monthly fees unless customers maintain average balances of at least $2,000 to $2,500. While some cards offer points bonuses for keeping higher balances, those rewards lag behind what consumers could earn in interest in high-yield savings accounts.
Southwest began considering debit cards two years ago after noticing that debit transactions were accounting for a growing share of flight bookings, said Corbitt Burns, managing director of loyalty at Southwest.
Though the airline has run a successful co-branded credit-card program for years, it couldn't turn to its longtime credit-card partner, JPMorgan Chase. The bank stopped offering debit rewards in 2011 after regulators capped the amount issuers could charge merchants for each debit swipe.
But the rules carved out an exception for small banks, which are allowed to charge twice as much per debit transaction as peers with $10 billion in assets or more. And so Southwest is working with Sunrise Banks, a small lender with five branches sprinkled across Minnesota and South Dakota.
Small banks like Sunrise are permitted to charge up to 46 cents per debit transaction. Those institutions bring in roughly $146 of revenue per active debit-card customer a year, compared with $91 for larger banks, according to the 2025 Pulse Debit Card Issuer study.
Still, transaction fees alone aren't enough to fund the kinds of perks travel brands are now offering, like free checked bags, status boosts and complimentary hotel stays. The companies say they are willing to cover the additional costs because customers who sign up for their cards tend to be more loyal and more profitable.
Southwest said it has been encouraged by the early results after launching its card in October. The enthusiastic response to the initial email invitation to apply for the debit card overwhelmed a server, and executives say they are now planning to add features like bill pay to make their product more competitive with traditional checking accounts.
Consumers are still most trusting of banks, but many, especially younger ones, show an openness to using products from fintech firms and alternative providers for financial tasks. A 2023 survey from fintech company Plaid found that nearly 80% of Americans say they are comfortable relying on companies that aren't banks, such as fintech firms and retail brands.
Burns, curious to know what convinces people to open new checking accounts, asked his team to identify the first customer who added a direct deposit to their new Southwest debit card. Last month, he called that customer, a recent college grad outside of Oklahoma City, but the explanation was less nuanced than he expected.
"He said, 'You know what? I just love Southwest,'" Burns said.
Write to Imani Moise at imani.moise@wsj.com
(END) Dow Jones Newswires
United's Gateway credit card provides two frequent-flier miles per dollar spent on flights. "New Debit Cards Have an Unexpected Feature: Rewards," at 12:00 p.m. EST, incorrectly said it provides seven miles per dollar spent on flights.
(END) Dow Jones Newswires
December 05, 2025 17:46 ET (22:46 GMT)
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