September 9, 2014

By Margaret H. Johnson

Have you seen this up and coming credit/banking industry product - Visa debit combo cards? Maybe you already have one in your wallet, but did you read the fine print? Let’s take a close look at the legal agreement and evaluate the pros and cons of the Visa Debit card.

Visa Debit card review - the pros, cons, and what you need to know

Some banks have offered Visa Debit cards for a few years now, and many more are jumping on the band wagon now and offering these to their customers. For the most part, the Visa Debit card is a debit card because the funds are drawn from a bank account rather than a Visa credit account. Where the Visa part comes in, is increased security and acceptance. You are able to use your debit card where Visa is accepted and debit is not, such as online, and the card receives the protection of 24/7 fraud monitoring and Zero Liability for fraudulent purchases provided by Visa.

Examples of the Visa/Debit cards available are the RBC Virtual Visa Debit Card, the TD Access Card, and the CIBC Advantage Card among others.

These are the advertised benefits of a Visa Debit card, and our take on them:

1. No interest, No annual fee, No monthly bill

A Visa Debit card has these benefits in common with a regular debit card -- because these are not credit transactions they are not charged interest, and do not get forgotten until a surprising bill comes in the mail.

But there is a caveat to this -- if your debit account has overdraft protection, you may still overspend your own money and dip into credit, which will be subject to interest charges.

RBC Visa Debit Agreement: If the final settlement amount exceeds your Account balance, your Account will be overdrawn and overdraft interest charges will apply as described in the section entitled “Overdraft Protection” of the Account Disclosures. However, the overdraft handling fee will not apply.

2. Unlimited Transactions

Like a regular credit card, you can make an unlimited number of transactions. However, depending on the financial institution’s policy, they may not be free. For the RBC Visa Debit, transactions do not count toward your debit transaction limit for the account. However, for the TD Visa Debit every transaction counts and over limit transactions are subject to additional fees.

Another important thing to note is that spending is not unlimited, despite the money you may have in your account. Predetermined daily, weekly and monthly spending limits are applied to the card.

RBC Visa Debit Agreement: We will set one or more limits that will apply to your use of your Virtual Visa Debit Number. We may change any of these limits, with or without notice to you. We will set a daily limit for purchases made using your Virtual Visa Debit Number and a per transaction limit for recurring pre-authorized payments. We will tell you what your current limits are when we send your Reference Card to you.

Where possible, we will allow you to choose the limits that best meet your needs, within a range of applicable limits that we will set.

Spending limits are set for security purposes, not necessarily a bad thing but something to be aware of.

RBC: These daily limits help protect against fraud and also assist with your budgeting techniques for responsible spending.

3. Money Management

Visa Debit cards are toted as being beneficial for money management because purchases are all from one place/account, making spending easy to track, as well as debited immediately so you always have an up to date balance for your account. As well, the spending limits can be applied to rein in spending and help you to stick to your budget.

While these are good points, you would need to use your Visa Debit card exclusively to fully realize these money management benefits. Many people will still make purchases with store credit cards to receive points or discounts, other rewards credit cards, and cash, so tracking will not be so simplified.

Also, with the spending limits acting as enforced budget restraints, you need to keep your spending fairly regular. If you want to make an irregularly large purchase from your account that goes over your daily spending limit, you will have to make special arrangements for that. Being denied a debit charge at the till can be an embarrassing and inconvenient experience, especially if you do have the money in your account, so that is one potential downside of the Visa Debit card.

4. Worldwide Acceptance

You can use your Visa Debit card to make purchases while travelling abroad, as well as through online, telephone and mail order catalogue shopping from foreign sellers, wherever Visa is accepted (according to the banks).

While there are many global online merchants who accept Visa Debit purchases, many Canadian merchants do not at this time as they are still catching up to the technology. You need to confirm each merchant accepts Visa Debit before completing a transaction as a Visa Credit Card.

As well, additional enrollment may be required for online purchases, like the Verified by Visa security program:

RBC: You may be required to take additional steps (including using a separate password and enrolling in customer security programs (such as Verified by Visa‡) in order to purchase goods and services on the Internet from certain merchants. It is your responsibility to participate in programs established and supported by Visa or us as required if you want to take advantage of these Internet purchase opportunities.

Also, be aware that extra fees apply to foreign currency purchases over and above the exchange rate:

RBC: When you use your Virtual Visa Debit Number for a transaction in a currency other than Canadian dollars, we will convert the transaction amount into Canadian dollars at an exchange rate that is 2.5% over a benchmark rate Royal Bank of Canada pays Visa International, a subsidiary of Visa Inc. on the date of the conversion. For most transactions, the authorization amount debited by the merchant at the time of purchase will be adjusted at settlement to reflect changes in the applicable exchange rate.

5. Security and Protection (24/7 fraud monitoring)

Regular debit cards do not receive continual monitoring for fraud, but a Visa Debit card benefits from Visa’s 24/7 fraud monitoring and Zero Liability for fraudulent purchases.

However, be very careful that you are taking all of the proper precautions for protecting your card and pin number from anyone besides yourself in order to be eligible for Zero Liability (ie. receive a refund for fraudulent theft). In the case of unauthorised use, you must cooperate with the investigation and show that you had reasonable protection of your card and information in order to receive a refund of unauthorized debits.

RBC: You will not be responsible for transactions made with your Virtual Visa Debit Number as a result of the fraudulent and unauthorized use provided that you (i) are able to establish to our reasonable satisfaction that you have taken reasonable steps to protect your Virtual Visa Debit Number and Reference Card against loss or theft, (ii) cooperate fully with our investigation, and (iii) did not contribute to the unauthorized use of your Virtual Visa Debit Number. “Unauthorized use” means use by a person other than you who does not have actual, implied or apparent authority for such use, and from which you do not receive any benefit.

Increased security and protection is a major benefit to the Visa Debit card, just make sure you take that seriously and do not inadvertently expose yourself to the risk of fraud or unauthorized use. Never share with family or friends to make purchases on your behalf.

6. Charitable

RBC has a version of their Virtual Visa Debit Card called the “Free the Children Virtual Visa Debit” which provides donations from RBC to the Free the Children organization based on a percentage of what you spend on the card.

RBC: Royal Bank will donate a portion of each purchase you make with a Free The Children Virtual Visa Debit card to support the Free the Children organization. You'll get the satisfaction of knowing that you're helping out those in need every time you use your card!

RBC says there is no other difference between the charitable card and the regular Visa Debit card. The charitable aspect here is wonderful, there’s no denying that, and why they offer a non-charitable version at all is an interesting question. So, unless you do not want to support that particular charity, this card can benefit others in need each time you use it and you can feel good about that.

The only potential downside of this aspect is if you were to use the charity as an excuse to spend more money than you should. If it makes you feel so good to pull out the card that you find yourself wanting to use it for that reason, or that you tell yourself it’s ok to spend more money because it helps charity, that is when you have an issue. In that case, donate a set amount to charity separately and use a card that doesn’t encourage extra spending.

7. The Best Benefit

We have discussed the six top benefits of the Visa Debit advertised by the banks, but we think that this benefit is just as good, if not more important: Visa Debit cards are great tools for people with bad credit ratings. They allow people the benefit of a credit card such as making purchases online, booking a hotel room and renting a car, when they may not qualify for an actual credit card due to bad credit.

RBC on who qualifies: Any RBC Royal Bank client aged 14 and over with a Canadian dollar RBC Royal Bank banking account.

Keep in mind that if you are looking to rebuild your credit rating, a prepaid credit card is a great tool for that. Prepaid credit cards report your payments to the credit bureaus, which help to build up your credit score while still spending your own money rather than using new credit. Visa/Debit cards do not report to the credit bureaus, therefore they cannot help you to raise your credit score. But with the money managing and budgeting aspects discussed earlier, they may help improve general finances for those with poor credit.

So there you have it, the purported benefits of Visa/Debit cards and a close look at the fine print and potential negatives -- will you be rushing out to sign up for a Visa Debit card or pass on this latest financial fad? If you have read through this whole article and are thinking before you leap, then we think you are well on your way to financial success, either way.

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!


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