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Looking to make debit cards more attractive to consumers by offering incentives that rival those found in credit card rewards and loyalty programs, Oxygen Inc., a San Francisco-based financial-services technology provider, on Wednesday introduced Elements, a tiered rewards and loyalty program for debit card holders.
Rewards available through Elements include cash back on everyday purchases, escalating annual percentage yields, subscription savings from Netflix and Peloton, and travel-related benefits, such as standard travel insurance on delayed and lost luggage and hotel theft, and auto-rental collision-damage waiver insurance.
Oxygen chose its rewards based on market research. “We knew travel, traditionally a big loyalty pillar, would come back big post-pandemic, and we are already seeing that being borne out,” Oxygen chief executive Hussein Ahmed says by email. “We’ve really created a proprietary loyalty platform that offers cashback on well-known brands like Trader Joe’s and Whole Foods, yet allows for choice on many other categories like gas, rideshare, food delivery, and more.
The rewards are being packaged in four tiers on four separate Visa-branded debit cards, each with its own rewards structure. The four cards, which are issued by The Bancorp Bank, are named Earth, Water, Air and Fire. The Water, Air, and Fire cards carry annual fees of $19.99, $49.99, and $199.99, respectively. There is no annual fee for the Earth card. Oxygen created four separate rewards cards to offer aspirational rewards that provide consumers variety, Ahmed says.
As the annual fees escalate, the rewards packages on the cards become richer. Earth cardholders, for example, can earn 2% cashback on purchases, while Fire cardholders can earn 6% cash back. Cardholders need to earn $10 in cashback to cash out rewards. The cash-back rewards are underwritten by ReliefClub Inc., which does business as a fintech under the Oxygen brand, according to Oxygen’s Web site.
Annual fees are waived if cardholders meet initial and annual savings and spending thresholds. For example, Water cardholders must initially maintain a balance of $1,500 in their account for 30 consecutive days and/or spend $500 a month.
“There is a well-documented movement to debit away from credit, especially with the younger cardholders we often serve,” says Ahmed. “Traditionally debit products did not offer the same benefits as credit, which presented a mismatch with today’s consumer expectation. We like to say our cardholders are rebels and trailblazers that reject the status quo, which is exactly what we are doing with Elements, reimagining what a debit product should be for the 21st-century economy.”
In addition to the rewards, Oxygen is also offering savings incentives, such as annual percentage rate yields that increase across the four Element cards. Rates range from 0.25% to 1.25% on the first $20,000 on deposit. Cardholders can also round up spare change to the nearest dollar when making purchases and move those funds into their savings account. Cardholders have the option to set round-up thresholds by as much as three times to meet their savings goals.
Offering rewards on debit cards is a rarity because they typically are not profitable for issuers says Sarah Grotta, director of the debit and alternative products advisory service at Mercator Advisory Group, Marlborough, Mass. “It’s hard for debit card issuers to encourage the right transaction behavior with debit rewards for the cards to make money,” Grotta says. Nonetheless, consumers do like cash back, Grotta adds.
Oxygen declined to say who is underwriting its non-cash back rewards, other than to indicate that the company is a Visa preferred partner. But one area where Visa can help with rewards is in leveraging merchant relationships for issuers to bring merchants into the program so issuers do not have to undertake that task themselves, Grotta says.
