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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Reward Checking Account Allows Credit Card Instead of Debit Card Purchases


Southwest Airlines Federal Credit Union

One downside with reward checking accounts is that it requires debit card usage to qualify for the high interest rate. Many savers prefer credit cards over debit cards since credit cards are generally safer. If your credit card is compromised, you just report the fraudulent charges to the issuer. No money is removed from your bank accounts. However, with a debit card, money is removed from your checking account. If it's a fraudulent charge, you have to fight to get your money back.

Today I came across one credit union that is now allowing credit card purchases instead of debit card purchases to satisfy the requirements for its reward checking account. The credit union is Southwest Airlines Federal Credit Union, and its LUV Reward Checking requirements can be met with either 15 debit or credit card purchases. At first I thought this might just mean that members can use their debit card with the credit option (non-PIN). However, it clearly states in the SWACU's Visa Credit Cards page that "you can even use your SWACU credit card to earn qualifications for LUV Reward Checking."

SWACU didn't need to make this reward checking account any more appealing. It's already the top reward checking account in the nation with a 4.00% APY for balances up to $25K as of 11/21/2012. Unfortunately, not many people are eligible to join this credit union. You have to work for either Southwest Airlines or one of the other companies in the credit union's Select Employee Groups. The credit union's Field of Membership doesn't appear to include any association that can be joined. I last reviewed the credit union in 2010. At that time only debit card purchases could be used to qualify for the high rates.

When the Durbin Amendment was implemented last year which capped debit card interchange fees, I thought credit cards may replace debit cards for reward checking accounts. Even though capped interchange fees only applied to large banks, there was still risk that interchange fees would be reduced even for small banks.

From my reward checking contact, I learned that it won't be easy for credit unions and community banks to add credit cards to their reward checking accounts. One reason is that a credit card with a rolling balance is, essentially, a loan. This can allow banks to earn more revenue from interest, but it adds risks to the banks' loan portfolios. There's also an added operational cost with credit cards. Banks often resell/rebrand another institution's card (in an arrangement called an "agent" program), but this cuts into the interchange revenue for the banks and it makes integration into a reward checking account difficult.

I'm not sure how SWACU was able to overcome these difficulties. With only $257 million in assets, it's not a large credit union. It's a good sign that we may see other institutions adding credit cards into their reward checking accounts. If you know of others, please leave a comment. Let's hope that the reward checking rates and balance caps remain high enough that we will still be interested.

Related Pages: Southwest Airlines Federal Credit Union, checking account

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Comment #1 by Anonymous posted on
LGE Community CU in metro Atlanta has been counting credit card purchases toward requirements since they started their High Rate checking.

Comment #2 by 51hh posted on
For SWACU, it will be a new credit card application (with hard inquiry).  For poeple with multiple SWACU Luv RCAs (like me), it means multiple applications for credit cards since each credit card can only link to one RCA.

Comment #7 by 51hh posted on
This is excellent and new information Ken discovered for us.  We should all thank him for a difficult job well-done for this year, especially during Thanksgiving!!

Comment #8 by darkdreamer4u posted on
I have the hardest time finding their SEG or field of membership list with other employers that provide eligibility. Anybody have any luck?

Comment #9 by 51hh posted on
I think that they hide it deliberately (some told me that they refused to send it even upon request); i.e., no new membership desired:-)

Comment #13 by Harry Clark (anonymous) posted on
Harry Clark
I think now days mostly people of the world are using own Credit Card at the personal level. For example shopping, online pay the money using the credits card as comparison to use the Debit cards.