How Visa Debit Card Works in the US vs. Canada

Last Updated on September 20, 2023

Ever wondered what these are? OR why customers use them instead of credit cards? In this article we're going to cover some of the surprising answers to these questions, plus how you could be missing out by not accepting these card types, or worse, paying too much.

What is a Debit card?

A debit card is a type of bank card issued by a customer's bank which can be used to make purchases using funds pulled from their savings or checking account. Unlike credit cards, the transaction can only be approved if the customer has the available funds in their account. Customers can also withdraw cash using a debit card, either from the bank, using an ATM, or by requesting cash back options where available during a transaction.

Debit cards are much easier to be approved for than a credit card, since they don't carry the risk of cardholders not paying off their balance. However, debit cards don't often come with the same perks as credit cards.

Debit cards can only be used for in-person transactions, and are not always accepted for things like Tap at the gas station, or paying for parking.

There are work arounds for signing up for services which require a contract or recurring payment like gym memberships. A customer can sign up for ACH bank transfers that authorize the business to pull funds from their bank account every month for example. You can even set up monthly bills to come out of your account this way.

Visa Debit, on the other hand, offers a little bit more flexibility which we will explain next.

Is Visa Debit a Credit Card?

These cards act like a debit card, but with all -or at least many- of the added benefits of credit cards.

Whether you're tapping to pay for your morning coffee, traveling to Amsterdam, or ordering Skip The Dishes for the fourth time this week (no judgment here!) these cards are famous for giving consumers some of the purchasing power and convenience of credit cards. However, they are different than credit cards because they come without the responsibility, purchasing interest, or required credit score of obtaining and using credit cards.

The main difference between processing Visa Debit and credit card transactions being that the funds are pulled from the cardholder's bank account instead of borrowing money from the issuing bank up to their approved credit limit.

Prepaid vs. Visa Vs. Regular Debit

As we explained, a regular debit card cannot be used online and doesn't offer some of the rewards programs and security of credit cards. These are cards which pull funds directly from a customer's bank account, typically a checking or savings account

A preloaded debit card, on the other hand are cards loaded with a balance that are not associated with a bank account.

Prepaid cards are alike to a debit card in this way because they are pulling funds but they can also be used like gift cards to use online, in-person, or to pay bills.

These are sometimes used for anonymous prepaid card transactions since aren't linked with a customer account. Unless you have all the card details and purchasing receipts, however, it is hard to recover the funds in the event that a prepaid card is lost or stolen.

Like credit cards, prepaid debit cards have a CVV code on the back which helps to prevent fraud and ensure there is no unauthorized transactions. However, all that is required to make a transaction is to have the physical card.

Visa Debit cards do the same thing as a prepaid or debit card but can also be used like credit cards. They pull funds from a customer's bank account like a debit card, so they are linked to their financial institution.

In all three cases, you cannot access borrowed money or have access to a credit limit. They do not contribute to your credit score or acquire interest on unpaid purchases. In this way, they are different from credit cards. However, they can be a great tool to help limit spending and budgeting, or if you need to make online purchases but do not have access to a credit card. They also offer more security and protection from unauthorized online transactions if they are lost or stolen, as they can be cancelled and locked unlike prepaid cards.

How a Purchase is Made With a Visa Debit Card

Sort of the distant cousin of credit cards, Visa Debit cards make purchases using money from your account rather than borrowing money to be paid later. The money is already in the account and pulled directly from the consumer's account rather than borrowing money to give to the card brand issuer from the issuing bank to be paid later.

They work similarly to credit cards in that you can use them:

At millions of locations around the world
Over-the-phone
Online
In-person tap, swipe, and sign or PIN
At ATM withdrawals to take cash out
For recurring or bill payments
While traveling

While there are many uses for Visa Debit cards, the way in which they work is different depending on whether you are in the U.S or in Canada. We will talk more about that here next.

How Visa Debit Works in the US

In the U.S., Visa Debit allows customers to use the same card to make both their credit and debit purchases. The card can run on both networks whether the purchase is for debit or credit. Because the card operates on the both, a merchant can choose whether to process it as a debit or credit purchase, which makes the cards usable anywhere.

The customer's responsibility is to clarify if they would like to make a purchase using credit or debit. A credit purchase uses the cardholder's available credit card limit, while debit will deduct the purchase amount from the available balance in their checking or savings account. The merchant will then run the card through their payment processing system based on how the customer wants the transaction to be processed.

As part of the Derbin agreement, you as the merchant can process the card through the Interac rails first which could save them costs in processing fees. Your customer will have to remember their PIN to do this, or alternatively you can process the transaction through the default Credit rails.

The customer benefits from purchase protection on all their transactions, and they still earn points for their debit purchases.

Types of Visa Debit cards in the U.S

Visa offers 25 different Visa Debit cards in tandem with bank names such as TD Banks, Navy Federal Credit Union, Regions Lifegreen, Greater Nevada Credit Union, and more. Visa Debit cards in the U.S. typically qualify for more rewards and perks than their northern neighbor.

At a minimum, most options waive the monthly fees, ranging from no balance requirement and surcharge-free ATM withdrawals to Zero Liability and purchase protection perks. Some cards, such as the Greater Nevada Credit Union Checking card, even have compatibility with Apple Pay or other contactless payment methods.

How Visa Debit Works in Canada

In Canada, debit and credit cards must be issued as separate payment cards according to the Code of Conduct for the Credit and Debit Card Industry in Canada. This means Visa Debit operates on a distinct network from the Interac network, used by almost all debit cards in Canada.

Whenever a consumer makes a purchase using a swipe or chip and pin technology on their debit card, the transaction will be processed as an Interac debit transaction. When a consumer makes an online or phone purchase using the numbers on the front of their card, the card will function as a Visa Debit card. These hybrid Canadian debit cards automatically deduct the money from the cardholder's bank account for all transactions, regardless of whether the transaction was processed using Visa's or Interac's network. If funds are not available, then the transaction will be declined. The card does not "˜borrow' money the way a credit card does.

The five types of Visa Debit cards in Canada

There are five types of Visa Debit cards, and they each have unique restrictions, fees, and rewards programs.

Depending on your card, you may access unique perks and protections such as warranty, price and purchase protection, international medical services, digital concierge, auto rental insurance, or even a dedicated COVID Help Line.

Processing Rates: What You Need to Know About Accepting Visa Debit

If you're a merchant or business owner in Canada, then Visa Debit purchases are processed as a credit card when the customer processes the transaction over-the-phone or online, and the interchange rates for that card brand card will apply. If you are using it in-person then it will be processed as a debit card and the transaction will run through the interac lines.

However, suppose you're a U.S. merchant. In that case, you might have heard of the Derbin agreement which advocated for caps on interchange rates and the ability to process Visa Debit through the Interac rails before processing the card as a credit card on the credit rails (which has a higher fee.)

Why don't Visa Debit cards always default to cheaper Interac processing rates then?

It's a funny story. When the Derbin agreement was first introduced, many U.S. customers realized after processing their Visa Debit cards like credit cards for so long, they were so used to swiping and many did not remember their pins. It was so common that it is now standard to offer the ability to process the Visa Debit card either way.

As a business owner, you can recover the credit card processing charge with a convenience fee, or they may accept this as a cost of business to accommodate their customer's payment needs.

Consumer Drawbacks of Visa Debit Cards

Although there are many reasons that we just went over why it is beneficial to accept credit cards at your business, there are some drawbacks for consumers and merchants to taking them.

For consumers, using Visa Debit cards means:

Purchases won't build ( or hurt) your credit.
There may be limited services or access.
Monthly fees, activation fees, and ATM fees depend on your provider.
Withdraw and purchasing limits.
When using credit rails, interchange rates/ processing fees are higher in Canada.

Reasons Your Business Should Accept Visa Debit?

1. Give Customers Choice and Convenience

Visa Debit gives customers more choice in how they want to pay for items. By increasing the likelihood that a customer can pay using their preferred method then you're ensuring your business is not going to miss out on any potential sales.

2. Easy Payments for Travelers

Visa Debit allows customers from countries where debit cards are common to continue using their cards in countries that do not typically use or accept debit cards. Travelers may not travel with large amounts of cash so by increasing the variety of cards that you accept it will be easier for travelers to shop with you.

3. Not Everyone Has Access to a Credit Card

Not everyone has a credit card. Some people may not be eligible for a credit card because they are under 18, they lack the credit needed to get a card, or they are simply more comfortable with other forms of payment. By accepting Visa Debit, you are making it easier for those without credit cards to access the goods and services they are interested in.

4. Consumer Protection

Visa Debit comes with Visa's Zero Liability Policy which gives consumers protection for their purchases that they do not get using the Interac Debit network. Consumers can be confident in using their cards knowing that the transactions are protected.

Let's Recap

Now you know what a Visa Debit card is, how to use one, the benefits, and the differences between the U.S and Canada.

Now you know how Visa Debit cards work and how the credit/ Interac rails are involved when your customers make purchases in Canada vs. the U.S. We've hopefully done a fair job of pitching the benefits of accepting Visa Debit at your business to accommodate those customers who do see the value in using Visa Debit cards. At the very least, maybe you've discovered a neat way to help your kids budget their allowance every month and teach them practical life skills.

Need to Accept Visa Debit Cards?

Visa Debit cards can be used for retail through a Virtual Terminal or your Online Checkout. If you have a Helcim merchant account, then you're automatically able to accept Visa Debit. If your business needs to accept credit cards, Helcim provides honest, transparent, and affordable credit card processing that stands out in an industry known for shady business practices and customer exploitation. Our Interchange Plus pricing is widely regarded as the most honest and affordable billing method in the industry and our customer service is consistently lauded as a step above. If you have any questions or would like a complimentary rate comparison, don't hesitate to contact our friendly customer support team.