The news: Southwest Airlines rolled out a rewards debit card, per a press release.

The Southwest Airlines Rapid Rewards Debit Card runs on Visa’s network and is issued by Sunrise Bank in partnership with SoFi-owned Galileo’s card issuing platform.

The details: The card comes with a $6.99 monthly fee unless the cardholder maintains a minimum average monthly balance of $2,500.

Cardholders get the following benefits:

• 1 point for every $1 spent on Southwest purchases, dining, and select subscriptions and 0.5 points for every $1 of other spend
• 2,500 point welcome bonus for making two recurring deposits and spending $100 within 90 days
• 7,500 bonus points annually and a 7,500 companion pass bonus each year, among other perks

The bigger picture: Given debit card transactions don’t have the same margins as credit cards, rewards programs have been difficult to implement. Fintechs have led innovation in this space—in part by partnering with smaller issuers who aren’t subject to the same debit interchange caps as big banks.

• P2P players. Venmo revamped its debit card in June, offering limited-time cash back rewards from select retailers. The Cash App Card also gives cardholders offers and discounts at various retailers.
• Crypto providers. Crypto.com, Coinbase, Wirex, and Fold all offer crypto-rewards debit cards. Upstart just launched a debit card that gives cardholders up to 6% back in XRP rewards.

Wyndham Rewards also launched a rewards debit card earlier this year, but Southwest is the largest travel brand to do so.

Our take: Offering a debit card helps Southwest tie customers closer to its loyalty program and encourage more repeat spending. Requiring a minimum deposit or monthly fee also offsets some of the rewards costs. Southwest can then upsell its debit cardholders to its likely more profitable cobrand credit card.

But getting consumers to sign up may be a tough sell. Consumers who don’t have the credit scores or means to pay for a Southwest credit card may balk at parking $2,500 in a checking account. They will instead have to be convinced that the rewards are worth the monthly fee—which, annualized to $83.88, is nearly on par with Southwest’s entry-level credit card anyway.