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FINANCIALLY AESTHETIC · GUIDE 08/37
DEBIT CARDS, CREDIT CARDS & DIGITAL WALLETS
FA-2.2 · Banking, Payments & Credit
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WHAT THIS CONTROLS
The checkout screen looks the same, but debit, credit and wallets pull from different systems.
Using a Debit Card
A debit card is a card you use to pay for goods and services, or to withdraw cash, directly from your bank account. Depending on your financial institution, you may have to pay fees to use your debit card.
Financial institutions, such as banks, usually give you a debit card when you open a bank account.
Your financial institution may set a daily limit on the amount of money you can withdraw with your debit card. A credit check may be used to determine the card’s daily limit. Limits may vary for withdrawals, in-store purchases, and online purchases. Check with your financial institution to find out your debit card’s limit and any fees that may apply.
The PIN and Authorizing a Debit Transaction
Your personal identification number, or PIN, is a numeric password used to confirm your identity. It allows you to access your account information. You need a PIN to use your debit card. Generally, you do not need a PIN for contactless payments, when you tap your card on the payment terminal. You will be asked to enter your PIN if you exceed the limit for contactless card payments.
When you use your debit card in a store, you must insert your card into the terminal or tap your card, phone, or other payment device on the terminal. If you insert your debit card, you must enter your PIN on the keypad to authorize the transaction. You’ll also need to enter your PIN if you use your card and exceed your contactless expenses limit.
When you use your debit card at an ATM, you must insert it and enter your PIN on the keypad to complete the transaction. You can also use a contactless card at a contactless ATM. You may be charged fees if you use an ATM that does not belong to your own financial institution.
You can use your debit card to make online purchases. When you use your debit card online, you do not have to provide personal financial details to the merchant or create an online account to make purchases. If you use an online service to buy something from a merchant’s website, you’re usually protected against fraudulent transactions. Some financial institutions and card companies may also extend this protection to mobile transactions.
Protecting Your PIN
You may be held liable for transactions you did not make or authorize if you do not protect your PIN.
To protect your PIN:
- Do not keep your PIN near your debit card
- Do not write your PIN on your debit card
- Never give your PIN to anyone else, not even a family member
- shield the keypad when entering your PIN at an ATM or in-store terminal
- Cancel the transaction and use another machine if someone is watching you or if you suspect something is wrong
- Notify your financial institution immediately if you think someone has your PIN
Co-branded debit cards
A co-branded debit card has two logos on the front. It features an Interac logo and a logo from another payment provider, such as Visa Debit or Mastercard Debit.
In addition to the transactions you can make with a traditional debit card, a co-branded debit card allows you to shop online and provides better access to debit transactions when traveling abroad.
A co-branded debit card is not a credit card. Regardless of the type of purchase, funds will always be withdrawn from your checking or savings account. The terms and conditions of your checking or savings account agreement apply to all your transactions.
How a Credit Card Works
A credit card allows you to make payments for goods and services in stores, online, and over the phone. Your credit limit is the maximum total amount you can spend. As you repay your balance, you gain access to more credit. This is called revolving credit.
You can use your credit card to pay for goods and services at the point of sale - such as at the register, over the phone, online, or by mail.
It’s a good idea to keep receipts for all your credit card transactions. Compare your receipts to your credit card statement to make sure there are no errors. If you find an error, contact the merchant to correct the transaction. If the merchant does not correct the transaction, contact your financial institution for assistance.
Credit Limit
Your credit limit is the maximum amount you can spend on your credit card. Card issuers set your limit when you get your credit card. You can ask them to lower or raise it.
Your credit card issuer must obtain your written or verbal authorization before increasing your credit limit. This is known as obtaining your express consent. If you give your express consent, your credit card issuer must confirm the change in writing. They must do so no later than your next credit card statement.
It is your responsibility to check your balance and stay within your credit limit. If you exceed your credit limit, you may have to pay an over-limit fee.
Federally regulated financial institutions cannot charge you an over-limit fee in certain situations. For example, if a merchant places a temporary hold on your credit card that exceeds your credit limit.
How Interest Applies - The Basics
You’ll pay interest if you don’t pay your credit card balance in full by the due date. You’ll continue to pay interest until your balance is repaid in full.
Interest rates vary depending on the financial institution and the transaction type. For example, you may pay an interest rate of 19% on regular purchases. You may pay an interest rate of 22% on cash advances or transactions such as cash withdrawals. Rates for specialty and merchant credit cards may be higher.
Credit card issuers grant you a grace period to pay off the previous month’s purchases interest-free. The grace period begins on the last day of your billing period. The grace period does not apply to cash advances, cash-like transactions, or balance transfers.
Federally regulated financial institutions must provide a grace period of at least 21 days.
For example, suppose you buy a smartphone with your credit card on January 15. On February 1, you receive your January credit card statement, which includes the charge for the smartphone. A 21-day interest-free grace period applies to purchases made in January. You have until February 21 to pay for your smartphone and any other purchases to avoid paying interest.
Cash Advances: A Use Worth Knowing About, but an Expensive One
You can use a credit card to get a cash advance by withdrawing cash from an ATM or from a teller at a financial institution.
There is no interest-free grace period for cash advances. You begin paying interest from the moment you receive the cash advance until it is repaid in full. The interest rate on cash advances is usually higher than for regular purchases. For example, the interest rate might be 19% for a regular purchase but 22% for a cash advance.
A cash advance can be a very expensive way to borrow money. Before taking out a cash advance, consider a less expensive way to borrow. Consider a personal loan or a line of credit. When you use cash advances, try to repay your balance as quickly as possible.
Digital Wallets and Mobile Payments
A mobile payment is a payment made using a mobile device, such as a smartphone or tablet. You can make a mobile payment using your device in various ways.
This type of mobile payment uses a technology called near-field communication.
To make contactless payments, follow these steps:
1\. Download a payment app that stores your credit, debit, or prepaid card information on your mobile device. The app may be provided by a financial institution or a mobile wallet
2\. Look for the “contactless” symbol on in-store payment terminals
3\. Open your payment app
4\. Hold your mobile device near the payment terminal until the payment is processed
5\. For some transactions, you’ll need to enter your password or scan your fingerprint
Depending on the payment method you choose, the app will do one of the following: charge the payment to your credit card, deduct the payment from your bank account, deduct the payment from your prepaid card, or add the amount of the payment to your monthly cell phone bill.
With in-app purchases, you use your mobile device to make a purchase from within an app. You pay for in-app purchases using the payment method saved in your app. These payment methods can include a credit card, a prepaid card, a debit card, a mobile wallet, or a wireless service provider.
Be aware of fraud when making mobile payments. Smartphones, tablets, and other mobile devices are at risk of identity fraud and fraud involving malware, or “malware.” Malware can access your data without your knowledge or consent. Malware specifically targets the financial sector. It allows hackers to access information about your financial transactions, whether it’s your login credentials or your account numbers.
Protections and Responsibilities in the Event of an Unauthorized Transaction
Visa, Mastercard, American Express, and Interac are committed to protecting you from financial loss. This applies in the event of unauthorized use of your credit card or debit card.
You must take reasonable precautions to protect your account information and personal identification number (PIN). If you have done so, they will usually repay you in full.
Credit Card
There is a maximum amount for which you will be liable if someone uses your credit card without your authorization.
If your credit card issuer is a bank, this amount is $50. There is an exception if you were grossly negligent (in Quebec, “gross fault”) in protecting your credit card and the information about your credit card account, as well as the personal information you use to authenticate yourself. This includes your PIN, passwords, or any other personal information used to verify your identity.
Your credit card may have been issued by a federally regulated financial institution other than a bank. In this case, the maximum amount is the lesser of $50 or the maximum amount set out in your credit card agreement.
Debit Card
You are not liable for financial losses resulting from circumstances beyond your control. For example, technical issues or the use of your card after you have already reported it as lost or stolen.
Generally, the maximum amount you are liable to pay cannot exceed your debit card’s withdrawal limit. In certain situations, you may be liable for an amount greater than your account balance - for example, if your account is linked to a line of credit or has overdraft protection, or if your account is linked to one or more other accounts.
If your card is lost or stolen but is still used to make purchases, as the cardholder, you are not liable if your card has expired or has already been canceled, if you report that someone else knows your PIN without your knowledge, or if you have taken the necessary steps to protect your PIN.
All debit cards bear the logo of a payment card network, such as Interac, Visa, or Mastercard. If you pay online with this type of debit card, you are protected by “zero liability” protections.
Your Responsibilities and Your Right to an Investigation
If a refund is possible, to receive a full refund, you must immediately notify your card issuer if you notice an unauthorized or suspicious transaction, if you lose your card, if you lose a mobile device used to conduct banking transactions or to store banking information, or if your card or mobile device has been stolen. You must also keep your PIN confidential and never disclose it to anyone, not even a family member; avoid choosing a PIN that is easy to guess, such as a date of birth or a phone number; and use different PINs for different accounts and cards.
Federally regulated financial institutions cannot hold you liable for a transaction made without your authorization simply because someone used an authenticator to carry out that transaction. An authenticator can be a PIN or any other password or piece of information created to verify your identity.
A federally regulated financial institution must always conduct a thorough investigation of any unauthorized transaction you dispute. This applies regardless of how the person carried out the transaction, including by using your PIN, a magnetic stripe reader, or other technology.
Your financial institution should take into account all circumstances that contributed to the unauthorized use of your credit card or debit card. This includes circumstances beyond your control, such as: you were coerced, your card was stolen, the system malfunctioned, or someone obtained your card number, PIN, or password by looking over your shoulder while you were using your card at an ATM or elsewhere.
Contact your card issuer immediately if you notice an unauthorized or suspicious transaction on your credit card or debit card account, if you lose your card, if your card has been stolen, or if you lose your mobile device used to make transactions or store banking information.
Surcharges for Merchants: A Practical Difference Between Debit and Credit
Merchants may add surcharges to your transaction for using your credit card (except in Quebec). Your purchase may cost you up to 2.4% more.
They must inform you of any surcharges before processing your payment. This allows you to cancel your purchase before authorizing the payment or to use another payment method.
To avoid surcharges, you can use another payment method, such as cash or a debit card, or go to another merchant that does not charge surcharges.
In some cases, you may have to pay a convenience fee or surcharges for using a payment terminal when you make a payment with your debit card in a store. A payment terminal operator or an ATM operator may charge you a convenience fee or surcharges if the fee is displayed on the screen when you enter your PIN, and if you have the option to cancel the transaction free of charge before completing it. Most merchants do not charge a fee when you pay with a debit card.
When Each Payment Method Makes Sense
A debit card withdraws money directly from your bank account: it’s suitable for purchases you want to pay for immediately, without accumulating debt, and is usually accepted without fees at most merchants.
A credit card operates on a revolving credit basis with a spending limit and an interest-free grace period of at least 21 days if you repay the balance in full by the due date. It can also offer expanded fraud protection and convenient access to credit when needed, but it exposes you to high interest rates as soon as an outstanding balance remains, and to even higher rates for cash advances.
Mobile wallets and contactless payments are always based on an underlying payment source - credit card, debit card, prepaid card, or wireless carrier account - and therefore do not add a separate method of payment in terms of financial liability, but they do carry specific risks related to malware and identity theft on the mobile device.
OPERATING RULE
Know which account funds the payment, which protections apply and what happens after an unauthorized charge.
CURRENT-RULES CHECK
Legal protections, tax rates, reporting duties, deadlines and product rules change by country and over time. Use the jurisdiction labels in this guide and check the linked official source before acting.
- Utiliser une carte de débit - Canada.ca - https://www.canada.ca/fr/agence-con...vices/activites-bancaires/utiliser-debit.html
- Comment fonctionne votre carte de crédit - Canada.ca - https://www.canada.ca/fr/agence-con...es/cartes-credit/fonctionne-carte-credit.html
- Payer avec votre téléphone cellulaire - Canada.ca - https://www.canada.ca/fr/agence-con.../paiements-mobiles/payer-avec-cellulaire.html
- Transactions par carte de crédit et de débit non autorisées: connaissez vos droits et responsabilités - Canada.ca - https://www.canada.ca/fr/agence-con...s/protection-transactions-non-autorisees.html
- Financial Consumer Agency of Canada - How credit cards work - Canada - cards, statements and interest.
- CFPB - Tips for using mobile payment services - United States - digital-wallet risk.
- CFPB - Unauthorized bank transactions - United States - bank-transaction error rights.
