I’d like a Visa Debit card but I bank with Simplii – can I still get one?
Unlike so many financial products, finally the industry got it right and chose a name that actually makes sense. There’s no acronym, nor catchy slogan – in fact, these cards have flown under the radar in Canada, mostly because they are offered by only a few of the big banks.
What is a Visa Debit? As the name would indicate, it is a Debit card (aka Interac®) which is linked to your chequing account but that you can use (almost) anywhere Visa is accepted. Your Visa Debit card limit becomes whatever money you have in your chequing account.
Advantages
Why would you want to hold a Visa Debit instead of each card individually? There are some advantages
1. No ability to ‘over-spend’
In general, credit cards are designed to take all the thinking away from spending. You just tap your card and walk away with that Instant Pot. No guilt, just cooking pleasure…until the credit card bill arrives.
If you are someone who is ‘credit-challenged’ then this type of card might be a great way to gain control of your money, while still benefiting from the convenience of using a Visa card to shop.
2. Shop anywhere
This is the biggest advertised advantage of these cards over the classic debit card. You can use a Visa Debit to shop online, or even use it when travelling abroad anywhere that a traditional Visa card would be accepted (so pretty much everywhere on the planet, except Costco). Has anyone else been to a foreign land (my examples Hong Kong, Poland, or Iceland) and received some questionable looks when you hand them your bright orange Tangerine card? The Visa logo adds an element of comfort to vendors. Note the Debit cards still charge the 2.5% foreign exchange conversion fee (just like a credit card).
3. Credit card protection
The affiliation with Visa provides the card holder with all the traditional security benefits including fraud protection and their “Zero Liability” protection.
Disadvantages
1. This card costs you money
Wait, what?! Here is the major flaw with these cards – only three (and a half…I’ll explain) of the banks offer them.
CIBC. Scotia. And RBC (but only for online purchases which means you will need another debit card, defeating the purpose). Not to be left out, BMO offers a Mastercard Debit with all the same principles.
The catch: none of these banks offer a free chequing account. At minimum, holding a debit card with these banks will cost you $4/month (max 12 transactions per month) or $15/month for unlimited transactions. You can avoid the fee if you keep a minimum of $4,000 in the account at all times (that’s a lot of Instant Pots sitting around not pressure cooking anything).
2. Miss out on credit card rewards
Indirectly, the Visa Debit not offering any points or rewards is another cost of having these cards. The opportunity cost of missing out on major cash-back promotions or travel reward points is a cost when compared to other Visa or Mastercards. If you’re like me and strategically put all spending through a credit card to maximize the cash rewards, then you are out of luck with the Visa Debit.
3. Not always accepted online
Visa has a list on their website of all the merchants that will accept these debit cards for online purchases. They advertise 44,000 in Canada, but smaller companies may not recognize the card which again defeats the purpose of having it!
The Answer
After reviewing these pros and cons, it’s clear these cards are simply regular debit cards on steroids! But the costs of holding one, in fees and lost rewards, may be too large to see the benefits.
If you’re looking to avoid getting trapped maxing out credit cards, then I recommend a blended approach of paying for daily purchases with your regular debit card with a bank that offers free chequing accounts.
For online purchases, keep a credit card with a really low balance that will force you to pay it off almost immediately. How low? $500. This may seem too low to make any meaningful purchases, but you can overpay a credit card if you know there is a big amount coming (like a vacation or a hotel stay). Or you can use a prepaid credit card.