Airline Rewards Take Off in the Debit Space with New Offerings From United and Southwest

In the past week, two airlines, United and Southwest, have introduced debit cards that reward customers for purchases. The solutions are likely to please consumers who either prefer not to use credit cards for purchases or don’t have the credit scores necessary to acquire the credit cards they want.

But the new products present a different story to credit card issuers, who now have to contend with more competitors in a marketplace they once dominated.

United’s MileagePlus Debit Rewards Card allows people to earn one mile every time they spend $1 on a purchase from United. Cardholders also can earn one mile on every $2 they spend on all other eligible transactions. 

“We’re constantly looking for new ways to add value and optionality for our members, and a debit card is a natural next step,” Bob Daly, Managing Director of Global Co-Brand Cards at United, said in a press release.

The new card from Southwest, which the company calls the Southwest Airlines Rapid Rewards Debit card, carries a similar structure to the United Card in terms of how it rewards cardholders for purchases.

Tony Roach, EVP Chief Customer and Brand Officer at Southwest, said in a press release that the card gives the company a way to expand its loyalty program and reach a variety of consumers.

SoFi’s financial technology arm Galileo, which helps companies build and scale innovative financial products, powers the new solutions from United and Southwest.

Airline companies have good reason to expand their rewards programs to the debit arena. Roach mentioned in the release that more than 90% of people in the U.S. use debit cards. 

And consumers, many of whom expect inflation to rise in the near future while job opportunities dry up, may ramp up their use of debit cards in the coming months to avoid interest charges on balances. 

A recent report indicates that 63% of Gen Z survey participants said they have stopped using credit cards to make purchases this year and instead turned to other forms of payment such as debit cards.

Credit card issuers that fear losing market share to new debit rewards products have several options at their disposal to retain existing customers and attract new ones.

Issuers can redefine the appeal of credit cards by linking them with financial health. Consumers who want to sidestep credit card fees may find programs that offer rewards for making on-time payments helpful.

Issuers can also ensure they are providing cardholders with the tools they need to easily track and manage their card spend. Consumers who have a better handle on their spending and approaching payment due dates can grow more confident in using credit cards.

Competition can lead to innovation. And although issuers may not welcome another competitor in a crowded marketplace, expansions in debit rewards offerings may ultimately lead to stronger credit card programs.