I receive compensation for many links on this blog. You don’t have to use these links, but I am grateful to you if you do. American Express, Citibank, Chase, Capital One and other banks are advertising partners of this site. Any opinions expressed in this post are my own, and have not been reviewed, approved, or endorsed by my advertising partners. I do not write about all credit cards that are available -- instead focusing on miles, points, and cash back (and currencies that can be converted into the same).
Zerocard is a product planning to launch next year — it works like a debit card but pays up to 3% cash back. It’s an FDIC-insured bank account, with charges deducted from your balance. But it processes like a credit card so they can pay out strong cash back. And the card is all metal.
The account pays interest, allows direct deposit, bill pay and ACH and wire transfers. There are no ATM fees in-network.
- The Durbin Amendment to Dodd Frank financial regulation destroyed debit card rewards. By capping fees for processing payments, it no longer made sense for banks to offer rich rewards for debit transaction.
- But the Durbin Amendment did even more than this. Since debit transactions were no longer profitable for banks, checking accounts alone often weren’t either. Banks started imposing higher minimum balances to avoid monthly fees. After the law was implemented we saw a rise in the ‘unbanked’ — people without access to the banking system, who pay high fees to use shadow banking like check cashing stores.
- American Express had what looked on paper like a brilliant play — Bluebird and Redcard products were basically debit cards with added banking features that got around Durbin Amendment limits on interchange fees. They partnered with Walmart and Target to get access to customers. And yet it didn’t take off the way Amex had hoped.
Zerocard is the new “let’s circumvent the Durbin Amendment” play — a debit card that processes as a credit card and pays up to 3% cash back. (HT: Hans Mast)
It offers cash back at four different status levels:
- Quartz earns 1.0%
- Graphite earns 1.5%
- Magnesium earns 2.0%
- Carbon earns 3.0%
Registering now for early access (just giving your email address) gives you Graphite and an easy way to start out at Carbon.
- Share your link on social media and get 2% cash back (Magnesium). (Hint: you can post to Facebook with a setting that only you can see the post.)
- Refer 3 people to sign up (give their email address) and 3% cash back (Carbon). This is my referral link to zerocard, feel free to leave yours in the comments.
This status lasts through the end of the year that you open your account plus the full next year.
Otherwise, your annual spend level determines your cash back percentage: $25,000 for 1.5%, $50,000 for 2%, and $100,000 for 3%. (In contrast, the Citi Double Cash Card gives you 1% + 1% from dollar one, versus only on spend over $50,000 in a year.)
Starting out at 3% cash back could be very lucrative, although it’s a limited audience for which it will make sense to earn lower levels of cash back through the program unless they really want their charges automatically withdrawn from their bank account (although most credit cards offer an automatic payment option).