A representative from Visa offered to answer a few questions for Consumerism Commentary readers about debit cards. I’ve written previously about five reasons to avoid debit cards, preferring credit cards for plastic payment. Here are three questions I asked Visa and the company’s responses. I have three more questions to post in the future as well.
What are your thoughts?
Question 1: With credit cards, the user has a chance to dispute fraudulent charges before their bank account is affected (through their payment of the credit card bill). With debit cards, any purchase made immediately affects a customer’s balance, and a fraudulent charge reduces the user’s available balance and increases the likelihood of an overdraft when it may not otherwise occur. How does Visa help protect the customer against this situation?
Response: If your account is compromised, Visa is committed to setting things right without further aggravation or inconvenience to you. Visa’s cardholder protection policy requires all financial institutions issuing Visa products to extend provisional credit for losses from unauthorized card use within 5 business days of notification of the loss. Many institutions will provide replacement funds even faster, sometimes within 24 to 48 hours.
My comments: The requirement of provisional credit within 5 business days is a benefit, but the delay can cause major headaches for people who keep their checking account balance high enough to cover expected expenses only. A provision credit can also be removed if the issue is not resolved within a certain amount of time.
Question 2: What other types of consumer protections does Visa offer to debit card holders?
Response: The Visa Check card offers better security protections than cash or checks. All Visa cardholders (debit, credit, or prepaid) are protected by Visa’s Zero Liability policy, which means you pay nothing if unauthorized purchases are made on your Visa Check cards or credit cards when you choose to sign for your transactions. While some issuing financial institutions also offer Zero Liability protections for certain PIN debit transactions as well, the best way to ensure you are protected is to sign for your purchase.
My comments: Unlike some credit cards, debit cards do not offer price matching guarantees or automatic extended warranties. Debit cards will never change interest or late fees, and there is a soft limitation to spend only what you have available.
Question 3: How is a debit card transaction that requires a PIN different than a debit card transaction that requires a signature? In some cases, merchants require neither a PIN nor a signature for the card to be accepted. Is one method more secure than the others?
Response: That’s a great question. Many of the benefits and protections Visa cardholders rely on, like Zero Liability protection, fraud monitoring, dispute rights and reward points, may only be available if the transaction is a “Visa” transaction, meaning it was processed over Visa’s network. The best way to ensure that Visa protections apply to the purchase is to sign (choose “credit”). Some PIN transactions are processed over Visa’s network, but merchants may use other payment networks that don’t offer the same protections. Cardholders should check with their issuing financial institution on their specific policies related to PIN debit transactions.
My comments: Be aware of competing priorities. When you’re shopping, cashiers often encourage you to use no-signature options, such as entering your PIN. This merchant pays less for this type of transaction than one that requires a signature. If your debit card has a Visa (or MasterCard) logo, choose a “credit” payment option to ensure you’re covered under the “Zero Liability” protections.
I have three more questions and responses to share. Do you have any reactions or comments about these responses?
Updated May 26, 2009 and originally published December 22, 2008.
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