Reward Checking Account Allows Credit Card Instead of Debit Card Purchases


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.

Anonymous   |     |   Comment #1
LGE Community CU in metro Atlanta has been counting credit card purchases toward requirements since they started their High Rate checking.
51hh   |     |   Comment #2
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.
51hh   |     |   Comment #7
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!!
darkdreamer4u   |     |   Comment #8
I have the hardest time finding their SEG or field of membership list with other employers that provide eligibility. Anybody have any luck?
51hh   |     |   Comment #9
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:-)
Harry Clark
Harry Clark (anonymous)   |     |   Comment #13
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.
High-Yield Reward Checking Account at Southwest Airlines FCU - Limited Membership

Southwest Airlines Federal Credit Union is offering a good deal on a high-yield reward checking account. It's called LUV Reward Checking and it offers the following rates and features if certain monthly requirements are met (as of 6/11/2010):

  • 4.00% APY on balances up to $25,000
  • 1.00% APY on portion of balance over $25,000
  • 0.10% base rate if requirements are not met
  • Unlimited ATM fee refunds nationwide

Monthly requirements include:

  • 15 debit card purchases
  • 1 direct deposit or 1 automatic payment
  • Receive eStatements

Other account features include:

  • $30 minimum initial deposit
  • No monthly service charge
  • No minimum balance required
  • Free online bill pay
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5.80% 48-Month / 5.70% 30-Month CD at a Texas/Arizona CU (Southwest Airlines FCU)
Southwest Airlines Federal Credit Union has some high rates on its long-term certificates. The most competitive include a 5.55% APY 24-month CD, 5.70% APY 30-month CD, 5.75% APY 36-month CD and a 5.80% APY 48-month CD. The minimum deposit is $1,000. An additional 0.02% to 0.10% is available for larger deposits of $50K and $75K. These rates are also available in an IRA certificate.

Membership is open to almost 170 Select Emloyee Groups in addition to employees of Southwest Airlines. You can also be eligible via your immediate family. Please see...

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