Does anyone have debit card reward plans? I'm confused about how we can give rewards on non-interest bearing checking account activity and not violate Reg D. What about 1099INTs?

I appreciate any information about how plans work.

Reg Q defines interest as "payment to or for the account of any depositor as compensation for the use of funds constituting a deposit." A reward for using a debit card does not meet this definition. It is not interest and does not require 1099INT reporting. It could, depending on the amount of the reward, trigger 1099-MISC reporting, but only if more than $600 in a calendar year.

It's not Regulation D you need to be concerned with, it's Regulation Q, which says, in effect, Thou shalt not pay interest on demand deposit accounts.

There is an exception, however, in §217.101(b). It allows you to ignore premiums paid to holders of DDA accounts if the premium is given without regard to a deposit duration or size. The exact wording is:

"Notwithstanding paragraph (a) of this section, any premium that is not, directly or indirectly, related to or dependent on the balance in a demand deposit account and the duration of the account balance shall not be considered the payment of interest on a demand deposit account and shall not be subject to the limitations in paragraph (a) of this section."

When this pragraph was added, the accompanying Federal Register material indicated it had been done explicitly to permit banks to entice customers to use other bank services, such as debit cards, ATM cards, etc.

Since this incentive isn't interest (not based on time/balance), it probably falls under 1099-MISC rules, but check with your tax reporting advisor on that aspect.