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Amazon Prime Reload: No-brainer or no, thank you?

Matt Schulz

Amazon is trying to bring debit card rewards back, but it may not be the no-brainer it sounds like for consumers.

The online retail behemoth recently announced its new Prime Reload program, which effectively allows Amazon Prime members to get 2 percent cash back for making purchases at Amazon.com with their debit card.

This is a big move because debit card rewards are largely a thing of the past. Debit card rewards, like their credit card counterparts, are largely paid for by swipe fees, the fees that merchants pay the banks every time one of those cards is used.

However, the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act — landmark financial regulation that passed in the wake of the Great Recession — put strict caps on the amount of fees banks could charge on debit card transactions. That made the transactions far less profitable for banks and brought a quick end to debit card rewards programs, despite their popularity. (Durbin didn’t restrict credit card swipe fees.)

On the surface, this sounds like great news for both Amazon and its customers. Amazon provides yet another incentive for people to sign up for Amazon Prime and gets to steer people away from credit cards, which are far more expensive for them to accept than debit cards. Meanwhile, consumers get cash back for debit card purchases again.

It’s not quite that simple, however. Here are three reasons why:

1. Flexibility: You only get the 2 percent cash back when you load your Amazon Reload gift card with your debit card. (For example, load $100 onto your gift card and Amazon will bump it up to $102.) That means that in exchange for that 2 percent back, you’re giving Amazon that money to hold rather than just keeping it in your own checking account where it can be used for other things.

That’s likely not a problem if you’re a regular Amazon shopper, but if you prefer more flexibility with your rewards, it is something to consider.

2. Information overload: To get the 2 percent rewards, you must provide Amazon not just your debit card number, but also your checking account number, the routing number associated with that account and your driver’s license number. That’s a lot of information to give in exchange for 2 percent cash back.

Remember: You should treat your personal and financial information like gold because that’s what it is to fraudsters, so take that into account before you sign up.

3. Amazon credit is a better option: If you’re an Amazon Prime member, the Amazon Prime Rewards Visa Signature credit card from Chase is one of the best values anywhere. It gives Prime members 5 percent cash back on everything they buy at Amazon.com, along with 2 percent cash back at restaurants, gas stations and drugstores. It also has no annual fee, a competitive APR range of 14.99 to 22.99 percent and no foreign transaction fees.

Plus, it comes with the safety advantages that credit cards hold over debit cards – most significantly, the fact that if a bad guy gets a hold of your credit card information, they won’t be able to access real money in your real checking account.

So should you take part in the Prime Reload program? I likely won’t, simply because the Amazon Prime Rewards credit card offers better rewards, more flexibility and greater safety. However, there’s no question that this program will be quite tempting for those who prefer debit cards over credit. They just need to understand that by making that choice, they’ll likely be leaving some rewards money on the table.

See related: New Amazon Prime credit card makes shopping more tempting, Battle of the store cards: Amazon Prime or Target Redcard? Amazon Subscribe and Save can save … sometimes

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