Click here for NOVEMBER 2010 Update: CIBC Launches First Debit Visa Card in Canada: So Far, LOOKS GOOD! Hopefully a Debit Mastercard is soon to come!
Canadian Will Soon Have Mastercard and Visa Debit Cards
Good news for Canadians that want the convenience of a Visa or Mastercard, but don't want to deal with monthly bills, are under 18, overspending, or have poor credit.
Visa and Mastercard are planning on launching debit Visa and debit Mastercards in Canada, perhaps in 2009. These cards will work just like Interac debit cards, whenever you make a purchase, funds are instantly taken out of your bank account and you can't spend more than you have.
These will make a nice alternative to the Prepaid Mastercards and Prepaid Visa cards now on the Canadian market, though for now, they are the best bet for some people.
Debit Visa and Debit Mastercards have been available forever in the USA, I even have one through my US Bank account, but I guess in Canada, the banks got their act together and implemented their own system, Interac, which every retailer signed up for because it was cheap.
Canadian Debit Mastercard and Debit Visa Advantages
These debit Visas and debit Mastercards will be great for those that want to buy stuff over the internet, since the electronic Interac system never really took off for e-commerce. Finally people will be able to book a hotel in advance that didn't have a credit card before.
The other advantage of these new Visa and Mastercards is that they will probably have better fraud protection than current Interac debit cards do, where the bank is basically being nice to you if they refund you fraudulent transactions.
The interesting thing is that Interac, Visa and Mastercard are all moving towards "chip-and-pin" systems, where the cards have a computer chip instead of a barcode, and you enter a PIN (like Interac before) instead of signing for each transaction. So, both methods of paying will take just as long to use.
Debit Cards with Decent Rewards in Canada?
One big difference between the two payment methods is the cost to the retailer. When Interac is used for payment, the retailer spends about six cents to process the transaction, but for Visa and Mastercard credit cards this is more like 2-3%. Why does this matter to you? Well, from this 2-3% commission, the credit cards give you rewards, like 1% cash back or the Airmiles Credit Cards. Prepare to see lots of Visa Debit Rewards Cards and Mastercard Debit Rewards Cards if Visa and Mastercard decide to charge retailers the same commissions for their debit cards.
However, Interac might jack up its fees to retailers (who have become dependent on the technology) in order to increase profits, but also to fund rewards for consumers. So far, just BMO and Scotia have rewards Interac debit cards, but they aren't too popular, though that could change if they had more money.
We'll just have to wait and see how it turns out, and I'll keep this page updated on that.
March 2009 Update on Debit Visa and Debit Mastercards in Canada
It looks like an article posted in the Vancouver Sun (courtesy of Canwest News Service) has many of the same worries as I. It also pointed out that Interac has recently applied to switch from a non-profit organization to a for-profit organization. I guess in order to be allowed to continue with their near monopoly status, they were required to stay non-profit, leading to ultra-low transaction costs for transfers over the Interac network and all in all a successful network. It will be interesting to see how they simultaneously fight for regulation of Visa and Mastercard debit cards and likely use the upcoming entry of these products onto their market as arguments that the market is currently competitive and be allowed to become for-profit. I can't say for sure though, I haven't investigated their Competition Bureau submissions (if even publicly available).