Credit Karma introduces new cash back rewards program for debit consumers

Credit Karma Money is launching cash back rewards for debit card owners, which will be enabled automatically on all Money accounts. The program will be powered by Cardlytics cash back platform, whose network of 10,000 local merchants and national chains will reward customers with real cash in their account every time they make a purchase. The amount of cashback will depend on the specific arrangement the merchant has with Cardlytics. Once the purchase is made, cash is returned to the customer’s Money account instantly.

Poulomi Damany, the SVP and GM of assets and tax at Credit Karma, told me that the launch comes as the most recent embodiment of their commitment to “providing financial progress for everybody, not just those who have thousands of dollars in their accounts”.

How it Began

“Consumers trust us with their credit and their data – would they trust us with their money?” was the question that kicked off Credit Karma’s foray into high-yield savings accounts. Damany says that the consumer feedback was heartwarming, as Credit Karma's audience began to trust their products as well as their goal to make financial progress more accessible.  

The early success and positive reception led to recent products like Credit Karma Money, which allows people to easily open checking accounts. According to Damany, Money was a recognition of the fact that “a number of our users are young, and they're just starting out on their credit journey”. It was important that Credit Karma enable these people to start their financial journey on the right foot. To this end, the company identified two critical steps: first, it was important that Money allowed consumers to access cash quickly, and second, that it rewarded them for making healthy financial decisions.

The new cash back rewards are “somewhere in the middle” of those two goals, with cash returning to the customer’s wallet after every purchase made at stores like Adidas and Shake Shack, both of which are on the Cardlytics network.

Get Your Cash Back

The program rewards consumers with actual cash in their accounts rather than points, and it also has no minimum spend and no maximum limit. Customers automatically enroll for cash back rewards when they sign up for a Money account. They can use their Credit Karma Visa debit card to make in-store and online purchases. In Damany’s words, it’s meant to be “simple and all-encompassing”, which is in stark contrast with how credit reward programs have historically worked, both in access and mechanics. Farrell Hudzik, EVP Financial Institutions, at Cardlytics shared that with the financial stress many people feel in today's market, rewards are important. "As inflation rates continue to rise and cause financial stress, every dollar counts and we’re proud to play a small role in providing peace of mind.”

Gen Z and Debit

Credit Karma’s focus on debit is prompted by their 110 million members, many of whom are Millennials or Gen Z. According to Damany, the reason why younger generations avoid credit has to do with the times these consumers grew up in. “This is a generation that has grown up in a financial downturn. They've seen their parents go through hard times by getting into debt. So, there's a little bit of aversion to accumulating debt”. 

Moreover, she added that “this is a mobile generation – they manage everything online. It's just easier for them to think that ‘I’ve spent the money that I have, my account is now debited, I don’t have any more to spend, so I shouldn’t be taking on debt’.” 

Hence, Credit Karma wants to ensure that when these younger consumer segments pick debit, they don’t miss out on the rewards programs that are part and parcel of every credit card scheme. To this end, earlier the company launched Instant Karma, which rewards consumers for spending the money they already have by giving them a chance to win a full refund on their purchase.

Instant Karma

With Instant Karma, consumers can win full imbursements daily on purchases up to $5000, the winners are chosen randomly, and the money is credited back to their account. Through this promotion Credit Karma got to build some great moments, where people went into the tire shop and got their four tires paid for, or they walked into a grocery store and had their entire bill paid.  Although the surprise and delight element of winning a full reimbursement adds to experience of using Credit Karma Visa Debit Card, they didn’t want to stop there. Since even though consumers were delighted to win Instant Karma, there was also the feeling of, “Oh man, I haven’t won in the last X times”, and the anxiety associated with it. That is why , the company is now introducing cash back rewards which do not return the entire amount of the purchase like Instant Karma, but instead provide a steady beat of cash back, without any uncertainty.

It’s Real Cash

Asking consumers to keep track of points that would be converted to cash delays access to funds, and also complicates the understanding of exactly what they have in their accounts.

Damany pointed out that if a consumer is living “paycheck to paycheck, every little bit of surplus helps” – especially because although their paychecks come twice a month, their bills come once every month, which creates a mismatch between spending and outlays. With cash back, Credit Karma wants to create a bit of a cushion, which takes the guesswork out of earning and managing rewards.

As a wholly owned division of Intuit, Credit Karma’s efforts in the consumer finance space have been supercharged by the acquisition. The company has created a combined ecosystem around tax refunds, which allows consumers to access their refunds in advance. “We wouldn't have been able to do that on our own without the scale and the support of Intuit,” says Damany.