CONSUMER PROTECTION IN ONLINE TRANSACTIONS

Consumer protections vary, depending on the network used. Visa and MasterCard, for instance, prohibit minimum and maximum purchase sizes, surcharges, and arbitrary security procedures on the part of merchants. Merchants are usually charged higher transaction fees for credit transactions, since debit network transactions are less likely to be fraudulent. This may lead them to "steer" customers to debit transactions. Consumers disputing charges may find it easier to do so with a credit card, since the money will not immediately leave their control. Fraudulent charges on a debit card can also cause problems with a checking account because the money is withdrawn immediately and may thus result in an overdraft or bounced checks. In some cases debit card-issuing banks will promptly refund any disputed charges until the matter can be settled, and in some jurisdictions the consumer liability for unauthorized charges is the same for both debit and credit cards.

In some countries, like India and Sweden, the consumer protection is the same regardless of the network used. Some banks set minimum and maximum purchase sizes, mostly for online-only cards. However, this has nothing to do with the card networks, but rather with the bank's judgement of the person's age and credit records. Any fees that the customers have to pay to the bank are the same regardless of whether the transaction is conducted as a credit or as a debit transaction, so there is no advantage for the customers to choose one transaction mode over another. Shops may add surcharges to the price of the goods or services in accordance with laws allowing them to do so. Banks consider the purchases as having been made at the moment when the card was swiped, regardless of when the purchase settlement was made. Regardless of which transaction type was used, the purchase may result in an overdraft because the money is considered to have left the account at the moment of the card swiping.

Debit cards and secured credit cards are popular among college students who have not yet established a credit history. Debit cards may also be used by expatriated workers to send money home to their families holding an affiliated debit card.

To the consumer, a debit transaction is perceived as occurring in real-time; i.e. the money is withdrawn from their account immediately following the authorization request from the merchant, which in many countries, is the case when making an online debit purchase. However, when a purchase is made using the "credit" (offline debit) option, the transaction merely places an authorization hold on the customer's account; funds are not actually withdrawn until the transaction is reconciled and hard-posted to the customer's account, usually a few days later. However, the previous sentence applies to all kinds of transaction types, at least when using a card issued by a European bank. This is in contrast to a typical credit card transaction; though it can also have a lag time of a few days before the transaction is posted to the account, it can be many days to a month or more before the consumer makes repayment with actual money.

Because of this, in the case of a benign or malicious error by the merchant or bank, a debit transaction may cause more serious problems (e.g. money not accessible; overdrawn account) than in the case of a credit card transaction (e.g. credit not accessible; over credit limit). This is especially true in the United States, where cheque fraud is a crime in every state, but exceeding your credit limit is not.

Debit cards may also be used on the Internet. Internet transactions may be conducted in either online or offline mode, although shops accepting online-only cards are rare in some countries (such as Sweden), while they are common in other countries (such as the Netherlands). For a comparison, PayPal offers the customer to use an online-only Maestro card if the customer enters a Dutch address of residence, but not if the same customer enters a Swedish address of residence.

Internet purchases may be conducted in either online or offline mode, and just as in the case where you use your card in a shop, it is (at least in most countries) impossible to tell whether the transaction was conducted in online or offline mode (unless an online-only card was used, in which case you know that it was conducted in online mode), since the mode isn't mentioned on any receipt or similar. Internet purchases use neither a PIN code nor a signature for identification. Transactions may be conducted in either credit or debit mode (which is sometimes, but not always, indicated on the receipt), and this has nothing to do with whether the transaction was conducted on online or offline mode, since both credit and debit transactions may be conducted in both modes.

A 2007 Washington Post article — on banks' lucrative debit card overdraft fees — pointed out that debit card issuers could notify customers electronically, allowing them to avoid overdraft fees. Nessa Feddis, banking industry spokesperson and lobbyist, contended that "current technology makes real-time notification of overdrafts cost-prohibitive. The article contended that "financial institutions don't want to change the status quo because they make good and easy money off their own customers' mistakes and irresponsibility.

In some countries, banks tend to levy a small fee for each debit card transaction. In some countries (e.g. the UK) the merchants bear all the costs and customers are not charged. There are many people who routinely use debit cards for all transactions, no matter how small. Some (small) retailers refuse to accept debit cards for small transactions, where paying the transaction fee would absorb the profit margin on the sale, making the transaction uneconomic for the retailer.

Debit cards in Australia are called different names depending on the issuing bank: Commonwealth Bank of Australia: Keycard; Westpac Banking Corporation: Handycard; National Australia Bank: FlexiCard; ANZ Bank: Access card; Bendigo Bank: Cashcard.

EFTPOS is very popular in Australia and has been operating there since the 1980s. EFTPOS-enabled cards are accepted at almost all swipe terminals able to accept credit cards, regardless of the bank that issued the card, including Maestro cards issued by foreign banks, with most businesses accepting them, with 450,000 Point Of Sale terminals.

EFTPOS cards can also be used to deposit and withdraw cash over the counter at Australia Post outlets participating in giroPost, just as if the transaction was conducted at a bank branch, even if the bank branch is closed. Electronic transactions in Australia are generally processed via the Telstra Argent and Optus Transact Plus network - which has recently superseded the old Transcend network in the last few years. Most early keycards were only usable for EFTPOS and at ATM or bank branches, whilst the new debit card system works in the same ways a credit card, except it will only use funds in the specified bank account. This means that, among other advantages, the new system is suitable for electronic purchases without a delay of 2 to 4 days for bank-to-bank money transfers.

Australia operates both electronic credit card transaction authorization and traditional EFTPOS debit card authorization systems, the difference between the two being that EFTPOS transactions are authorized by a personal identification number (PIN) while credit card transactions are usually authorized by the printing and signing of a receipt. If the user fails to enter the correct pin 3 times, the consequences range from the card being locked out and requiring a phone call or trip to the branch to reactivate with a new PIN, the card being cut up by the merchant, or in the case of an ATM, being kept inside the machine, both of which require a new card to be ordered.

Generally credit card transaction costs are borne by the merchant with no fee applied to the end user while EFTPOS transactions cost the consumer an applicable withdrawal fee charged by their bank.

The introduction of Visa and MasterCard debit cards along with regulation in the settlement fees charged by the operators of both EFTPOS and credit cards by the Reserve Bank has seen a continuation in the increasing ubiquity of credit card use among Australians and a general decline in the profile of EFTPOS. However, the regulation of settlement fees also removed the ability of banks, who typically provide merchant services to retailers on behalf of Visa,
MasterCard or Bankcard, from stopping those retailers charging extra fees to take payment by credit card instead of cash or EFTPOS. Though only a few operators with strong market power have done so, the passing on of fees charged for credit card transactions may result in an increased use of EFTPOS.

Canada has a nation-wide EFTPOS system, called Interac Direct Payment. Since being introduced in 1994, IDP has become the most popular payment method in the country. Previously, debit cards have been in use for ABM usage since the early 1980s. In the early 1990s, pilot projects were conducted among Canada's six largest banks to gauge security, accuracy and feasibility of the Interac system. Slowly in the later half of the 1990s, it was estimated that approximately 50% of retailers offered Interac as a source of payment. Retailers, many small transaction retailers like coffee shops, resisted offering IDP to promote faster service. In 2009, 99% of retailers offer IDP as an alternative payment form.

In Canada, the debit card is sometimes referred to as a "bank card". It is a client card issued by a bank that provides access to funds and other bank account transactions, such as transferring funds, checking balances, paying bills, etc., as well as point of purchase transactions connected on the Interac network. Since its national launch in 1994, Interac Direct Payment has become so widespread that, as of 2001, more transactions in Canada were completed using debit cards than cash. This popularity may be partially attributable to two main factors: the convenience of not having to carry cash, and the availability of automated bank machines (ABMs) and Direct Payment merchants on the network.

Debit cards may be considered similar to stored-value cards in that they represent a finite amount of money owed by the card issuer to the holder. They are different in that stored-value cards are generally anonymous and are only usable at the issuer, while debit cards are generally associated with an individual's bank account and can be used anywhere on the Interac network.

In Canada, the bank cards can be used at POS and ABMs. Interac Online has also been introduced in recent years allowing clients of most major Canadian banks to use their debit cards for online payment with certain merchants as well. Certain financial institutions also allow their clients to use their debit cards in the United States on the NYCE network.

Consumers in Canada are protected under a voluntary code* entered into by all providers of debit card services, The Canadian Code of Practice for Consumer Debit Card Services (sometimes called the "Debit Card Code"). Adherence to the Code is overseen by the Financial Consumer Agency of Canada (FCAC), which investigates consumer complaints.

According to the FCAC website, revisions to the Code that came into effect in 2005 put the onus on the financial institution to prove that a consumer was responsible for a disputed transaction, and also place a limit on the number of days that an account can be frozen during the financial institution's investigation of a transaction.

Carte Bancaire (CB), the national payment scheme, in 2008, had 57,5 milion cards carrying its logo and 7,76 billion transactions (POS and ATM) were processed through the e-rsb network (135 transactions per card mostly debit or deferred debit). Most CB cards are debit cards, either debit or deferred debit. Less than 10% of CB cards were credit cards. Banks in France charge annual fees for debit cards (despite card payments being very cost efficient for the banks), yet they do not charge personal customers for checkbooks or processing checks (despite checks being very costly for the banks). This imbalance most probably dates from the unilateral introduction in France of Chip and PIN debit cards in the early 1990s, when the cost of this technology was much higher than it is now. Credit cards of the type found in the United Kingdom and United States are unusual in France and the closest equivalent is the deferred debit card, which operates like a normal debit card, except that all purchase transactions are postponed until the end of the month, thereby giving the customer between 1 and 31 days of interest-free credit. The annual fee for a deferred debit card is around €10 more than for one with immediate debit. Most France debit cards are branded with the Carte Bleue logo, which assures acceptance throughout France. Most card holders choose to pay around €5 more in their annual fee to additionally have a Visa or a MasterCard logo on their Carte Bleue, so that the card is accepted internationally. A Carte Bleue without a Visa or a MasterCard logo is often known as a "Carte Bleue Nationale" and a Carte Bleue with a Visa or a MasterCard logo is known as a "Carte Bleue Internationale", or more frequently, simply called a "Visa" or "MasterCard". Many smaller merchants in France refuse to accept debit cards for transactions under a certain amount because of the minimum fee charged by merchants' banks per transaction (this minimum amount varies from 5€ to 15€, or in some rare case even more). But more and more merchants accept debit cards for small amounts, due to the massive daily use of debit card nowadays. Merchants in France do not differentiate between debit and credit cards, and so both have equal acceptance. This is legal in France to set a minimum amount to transactions but the merchants must display it clearly.

Debit cards have enjoyed wide acceptance in Germany for years. Facilities already existed before EFTPOS became popular with the Eurocheque card, an authorization system initially developed for paper checks where, in addition to signing the actual check, customers also needed to show the card alongside the check as a security measure. Those cards could also be used at ATMs and for card-based electronic funds transfer (called Girocard) with PIN entry. These are now the only functions of such cards: the Eurocheque system (along with the brand) was abandoned in 2002 during the transition from the Deutsche Mark to the euro. As of 2005, most stores and petrol outlets have EFTPOS facilities. Processing fees are paid by the businesses, which leads to some business owners refusing debit card payments for sales totalling less than a certain amount, usually 5 or 10 euro.

To avoid the processing fees, many businesses resorted to using direct debit, which is then called electronic direct debit (German: Elektronisches Lastschriftverfahren, abbr. ELV). The point-of-sale terminal reads the bank sort code and account number from the card but instead of handling the transaction through the Girocard network it simply prints a form, which the customer signs to authorise the debit note. However, this method also avoids any verification or payment guarantee provided by the network. Further, customers can return debit notes by notifying their bank without giving a reason. This means that the beneficiary bears the risk of fraud and illiquidity. Some business mitigate the risk by consulting a proprietary blacklist or by switching to Girocard for higher transaction amounts.

Around 2000, an Electronic Purse Card was introduced, dubbed Geldkarte ("money card"). It makes use of the smart card chip on the front of the standard issue debit card. This chip can be charged with up to 200 euro, and is advertised as a means of making medium to very small payments, even down to several euros or cent payments. The key factor here is that no processing fees are deducted by banks. It did not gain the popularity its inventors had hoped for. However, this could change as this chip is now used as means of age verification at cigarette vending machines, which has been mandatory since January 2007. Furthermore, some payment discounts are being offered (e.g. a 10% reduction for public transport fares) when paying with "Geldkarte". The "Geldkarte" payment lacks all security measures, since it does not require the user to enter a PIN or sign a sales slip: the loss of a "Geldkarte" is similar to the loss of a wallet or purse - anyone who finds it can then use their find to pay for their own purchases.

The EFTPOS (electronic fund transfer at point of sale) system is highly popular in New Zealand, with more debit card terminals per head of population than any other country, and being used for about 60% of all retail transactions. According to the largest EFTPOS network provider, "New Zealanders use EFTPOS twice as much as any other country.

It is not unusual for a New Zealander to have more than one EFTPOS card and for banks to offer fixed monthly fees for unlimited (100 or greater at least) EFTPOS transactions during that month. EFTPOS systems are capable of handling huge volumes of transactions during busy periods such as Christmas. The networks are highly sophisticated and have a number of safeguards in place to ensure security and to minimise the risk of disruption even during peak transaction periods.

Virtually all retail outlets have EFTPOS terminals, particularly supermarkets, "dairies" (convenience stores), service stations, and bars. Increasingly Taxi operators, businesses operating from stands at events and even pizza delivery people have mobile EFTPOS terminals.

New Zealanders use EFTPOS for both small and large transactions. It would not be unusual for a New Zealander to use an EFTPOS card to pay for an amount as small as 50 cents NZD. Because EFTPOS is such an integral part of spending in New Zealand, rare network failures cause tremendous delays, inconvenience and lost income to businesses who must resort to manual "zip-zap" swipe machines to process EFTPOS transactions until the network returns to service. Typically New Zealand merchants do not pay a fee per transaction as is the case in Australia and other countries. Transaction fees are typically borne by the customer, and retailers pay a fixed monthly equipment rental fee. As bank accounts for students and children under 18 years old typically attract low or no electronic transaction fees, the use of EFTPOS by the younger generations has become virtually ubiquitous. In recent times, major banks have started to offer accounts with no EFTPOS transaction fees.

The Bank of New Zealand introduced EFTPOS to New Zealand in 1985 through a pilot scheme with petrol stations.

EFTPOS is operated through two primary networks. One, EFTPOS NZ, owned by ANZ, and a second operated by Paymark Limited (formerly Electronic Transaction Services Limited) which is owned by ASB Bank, Westpac, and the Bank of New Zealand. The Paymark network processes approximately 75% of all EFTPOS transactions in New Zealand on their Paymark EFTPOS network and has over 73,000 points of sale.

During July 2006 the five billionth EFTPOS payment flowed across the ETSL/Paymark EFTPOS network since the electronic form of payment was introduced in New Zealand in 1989.

On 9 May 2007, Payment Express was certified as the first IP/broadband certified terminal allowing EFTPOS transactions to be transmitted securely over the Internet.

However security issues regarding EFTPOS payments over the public Internet and the costs associated with legacy (dial up) terminal replacement has hampered the growth of the IP medium in New Zealand. One company, Merchant IP Services (MIPS) offers an alternative IP-POS solution allowing for the secure IP connection of most legacy (dial-up) terminals without the need for terminal replacement. The PCI compliant and Paymark certified MIPS IP-POS system consists of a MIPS WebNAC connected to the legacy EFTPOS terminal converting dial up transaction data to IP before transporting the payment securely to the bank switch.

In March 2008 Paymark partnered with virtual wallet payment system pago to create New Zealands first debit or "stored value" system for online shopping.

The New Zealand eftpos system was one of the first in the world to be designed and its success and popularity have ironically meant that little has been done to incorporate it with systems from other countries as they were developed. Cards can only be used within New Zealand and only when physically at a merchant terminal. In response most banks started issuing eftpos cards co-branded as maestro so they could be used overseas. In 2009 a number of banks started introducing eftpos cards that, as well as having New Zealand eftpos facility also incorporated the Visa Debit system so that clients could use them on-line as well as overseas.

In the UK debit cards (an integrated EFTPOS system) are an established part of the retail market and are widely accepted both by bricks and mortar stores and by internet stores. The term EFTPOS is not widely used by the public, debit card (or Switch, even when referring to a Visa card) is the generic term used. Cards commonly in circulation include Maestro (previously Switch), Solo, Visa Debit (previously Visa Delta) and Visa Electron. Banks do not charge customers for EFTPOS transactions in the UK, but some retailers make small charges, particularly where the transaction amount in question is small. The UK has converted all debit cards in circulation to Chip and PIN (except for Chip and Signature cards issued to people with certain disabilities), based on the EMV standard, to increase transaction security; however, PINs are not required for internet transactions.

In the United Kingdom, banks started to issue debit cards in the mid 1980s in a bid to reduce the number of cheques being used at the point of sale, which are costly for the banks to process; the first bank to do so was Barclays with the Barclays Connect card. As in most countries, fees paid by merchants in the United Kingdom to accept credit cards are a percentage of the transaction amount, which funds card holders' interest-free credit periods as well as incentive schemes such as points, airmiles or cashback. Debit cards do not usually have these characteristics, and so the fee for merchants to accept debit cards is a low fixed amount, regardless of transaction amount. For very small amounts, this means it is cheaper for a merchant to accept a credit card than a debit card. Although merchants won the right through The Credit Cards (Price Discrimination) Order 1990 to charge customers different prices according to the payment method, few merchants in the UK charge less for payment by debit card than by credit card, the most notable exceptions being budget airlines, travel agents and IKEA[30]. Debit cards in the UK lack the advantages offered to holders of UK-issued credit cards, such as free incentives (points, airmiles, cashback etc.), interest-free credit and protection against defaulting merchants under Section 75 of the Consumer Credit Act 1974. Almost all establishments in the United Kingdom that accept credit cards also accept debit cards (although not always Solo and Visa Electron), but a minority of merchants, for cost reasons, accept debit cards and not credit cards.

AND In the U.S., EFTPOS is universally referred to simply as debit. The same interbank networks that operate the ATM network also operate the POS network. Most interbank networks, such as Pulse, NYCE, MAC, Tyme, SHAZAM, STAR, etc. are regional and do not overlap, however, most ATM/POS networks have agreements to accept each other's cards. This means that cards issued by one network will typically work anywhere they accept ATM/POS cards for payment. For example, a NYCE card will work at a Pulse POS terminal or ATM, and vice versa. Many debit cards in the United States are issued with a Visa or MasterCard logo allowing use of their signature-based networks.

The liability of a U.S. debit card user in case of loss or theft is up to 50 USD if the loss or theft is reported to the issuing bank in two business days after the customer notices the loss.

The fees charged to merchants on offline debit purchases—and the lack of fees charged merchants for processing online debit purchases and paper checks—have prompted some major merchants in the U.S. to file lawsuits against debit-card transaction processors such as Visa and MasterCard. In 2003, Visa and MasterCard agreed to settle the largest of these lawsuits and agreed to settlements of billions of dollars .

Some consumers prefer "credit" transactions because of the lack of a fee charged to the consumer/purchaser; also, a few debit cards in the U.S. offer rewards for using "credit" (e.g. Washington Mutual's "WaMoola" and S&T Bank's "Preferred Debit Rewards Card"). However, since "credit" costs more for merchants, many terminals at PIN-accepting merchant locations now make the "credit" function more difficult to access. For example, if you swipe a debit card at Wal-Mart in the U.S., you are immediately presented with the PIN screen for online debit; to use offline debit you must press "cancel" to exit the PIN screen, then press "credit" on the next screen.

One additional problem surrounding the use of debit cards is their use at a self-service gas pump like those common in the U.S. The customer might want to purchase fuel on their debit card, but the pump's computer does not know how much fuel the customer wants. The pump is activated by the customer presenting their card to a card reader (see methods described above) and possibly entering a PIN. At this point the pump will dispense fuel, though no sales transaction has completed. The pump has no way of knowing how much fuel will be sold, nor how much money is available in the customer’s debit account. In a typical sale transaction, trying to spend more money than is available in your account (credit or debit) will result in a "no-sale" alert to the merchant, and the sale does not occur. At a self-serve fuel pump, the fuel is already in the customer's tank by the time the bank knows the final sale price. Several solutions to this problem are in place, such as denying $1 pre-authorizations when an account holds less than $10 while still allowing transactions for specific amounts, but the concept of delivering the merchandise before the sales transaction plagues the debit card system. The commission is sometimes so high that the gas station sometimes actually loses money when someone pays for gas with credit. When pay at the pump started in the 1980s, many gas stations offered a discount for paying with cash. Most of them stopped doing that because the discount did not significantly increase their cash sales.

Minimum and Maximum Charges for Visa in USA
The Merchants Agreement for Visa states (page 9, or 14/141 in PDF):
Always honor valid Visa cards in your acceptance category, regardless of the dollar amount of the purchase. Imposing minimum or maximum purchase amounts in order to accept a Visa card transaction is a violation of the Visa rules.
Thanks to the Dodd-Frank Act, U.S. merchants can now set a minimum purchase amount on credit cards (but not debit cards), not to exceed $10.

FSA, HRA, and HSA debit cards
In the U.S.A, a FSA debit card only allows medical expenses. It is used by some banks for withdrawals from their FSAs, MSAs, and HSAs as well. They have Visa or MasterCard logos, but cannot be used as "debit cards", only as "credit cards"", and they are not accepted by all merchants that accept debit and credit cards, but only by those that accept FSA debit cards. Merchant codes and product codes are used at the point of sale (required by law by certain merchants by certain dates in the USA) to restrict sales if they do not qualify. Because of the extra checking and documenting that goes on, later, the statement can be used to substantiate these purchases for tax deductions. In the occasional instance that a qualifying purchase is rejected, another form of payment must be used (a check or payment from another account and a claim for reimbursement later). In the more likely case that non-qualifying items are accepted, the consumer is technically still responsible, and the discrepancy could be revealed during an audit. A small but growing segment of the debit card business in the U.S. involves access to tax-favored spending accounts such as flexible spending accounts (FSA), health reimbursement accounts (HRA), and health savings accounts (HSA). Most of these debit cards are for medical expenses, though a few are also issued for dependent care and transportation expenses.

Traditionally, FSAs (the oldest of these accounts) were accessed only through claims for reimbursement after incurring, and often paying, an out-of-pocket expense; this often happens after the funds have already been deducted from the employee's paycheck. (FSAs are usually funded by payroll deduction.) The only method permitted by the Internal Revenue Service (IRS) to avoid this "double-dipping" for medical FSAs and HRAs is through accurate and auditable reporting on the tax return. Statements on the debit card that say "for medical uses only" are invalid for several reasons: (1) The merchant and issuing banks have no way of quickly determining whether the entire purchase qualifies for the customer's type of tax benefit; (2) the customer also has no quick way of knowing; often has mixed purchases by necessity or convenience; and can easily make mistakes; (3) extra contractual clauses between the customer and issuing bank would cross-over into the payment processing standards, creating additional confusion (for example if a customer was penalized for accidentally purchasing a non-qualifying item, it would undercut the potential savings advantages of the account). Therefore, using the card exclusively for qualifying purchases may be convenient for the customer, but it has nothing to do with how the card can actually be used. If the bank rejects a transaction, for instance, because it is not at a recognized drug store, then it would be causing harm and confusion to the cardholder. In the United States, not all medical service or supply stores are capable of providing the correct information so an FSA debit card issuer can honor every transaction-if rejected or documentation is not deemed enough to satisfy regulations, cardholders may have to send in forms manually.