Wouldn’t it be great to have a cash back debit card? In fact, that is the sole reason many consumers pay with credit cards – not because they need to carry a balance, but because they want the cash back.

So if you are one of these types of spenders, the idea of debit card rewards probably sounds like a good idea to you, right? Unfortunately, it’s not quite that simple…

Why aren’t cash back debit cards common? (and who has ‘em in 2012?)

Let’s say you are paying for a purchase with your Visa or MasterCard debit card. When you swipe the card, it will ask you if you’d like to process it as debit or credit. You can choose the “credit” option and process it as such. It won’t make any difference on your end, but it makes a big difference to the store.

You see, the transaction fees on these two types of payment processing methods are drastically different:

• On a “credit” transaction (whether that’s processed using your credit or debit card) the transaction fee typically runs anywhere from 1.7% to 3% of the transaction amount, plus a fee of anywhere from 17 to 33 cents, on average.
• On a “debit” transaction (which can only be done using a debit card) is extremely cheap in comparison – the bank only earns a matter of pennies due to the Durbin Amendment which went into effect during the fall of 2011. For example, a $38 debit purchase (which the Fed estimates to be the average size) will cost 24 cents to process. That’s only about 6/10th of 1% and ultimately, the bank only will get a fraction of that since Visa/MasterCard and the processing company get a cut from the fees, too.

You can clearly see why a cash back debit card is almost impossible to find these days! Even if the bank offered you just 1% cash back, that would probably be much more than the fees they are collecting for the transaction.

This is why you it’s rare to find any kind of debit card with rewards, and when you do come across one, run the numbers and calculate how much their points are really worth. You will discover the rewards end up being no more than 1/10 to 1/5 of a percentage point… a 0.1% to 0.2% rebate.

With even the most basic credit cards nowadays offering 1% back on virtually all transactions, plus higher tiered rewards for certain categories, you can see it’s hard for these two types of cards to compete when it comes to rewards.

What can you expect to find?

This is why you cannot find any decent cash back debit cards on the market from the big banks, nor will you find any in the future as long as the processing fees work this way.

But even though Chase, Bank of America, Citi, and the other big banks stopped their debit cash back programs, it doesn’t mean you have to be left high and dry. Because of their low overhead, some online-only banks can still offer you debit card rewards.

By far the most generous among them is PerkStreet. The company was launched in 2009 and has been going strong ever since with their generous cash rebate program.

In a nutshell, here’s how Perkstreet works:

• Unlimited 1% cash back on non-PIN debit card purchases
• 2% cash back online at places like Amazon, Target.com, iTunes, Apple.com and more
• 5% cash back on “PowerPerks” categories and retailers that rotate throughout the year. You can earn up to $250 from the 5% categories every year (after that you earn the normal rebate).
• You don’t have to switch banks if you don’t want to. Simply link your Perkstreet account to your current bank’s checking account and transfer money for free when you wish to do so.
• Deposits are FDIC insured up to $250,000.

To learn more about this offer from PerkStreet go here

Last but not least, there’s always the option of just sticking with credit cards to earn rewards. However I know this doesn’t work for everyone…

Even if debt isn’t a consequence, credit does lead to overspending for some people. And earning 1-5% cash back is stupid and pointless if that piece of plastic is causing you to spend more. Or, some people just prefer debit because of the ease of use with tracking their cash (both incoming and outgoing) from a single account – their bank account.

With that said, if you can manage your spending responsibly, you may want to check out the top cash back credit card deals on the market to see if any of them are right for you.