FEBRUARY 2005

Rule Change Gives Visa PIN
Debit Cardholders Better Protection

Until late 2004, consumers that used PIN-based debit cards for retail transactions did not enjoy the same protections as users of credit cards or signature-based debit cards. If a customer was unhappy with a product or service delivered by the merchant, the only recourse was to try to negotiate directly with the merchant. In contrast credit and signature-based debit card users could appeal to the card issuer to intervene, and initiate a chargeback. This disadvantage of PIN-based debit cards was often cited by consumer groups and financial advisors as a drawback of using the cards. However, in December 2004, Visa USA's Interlink network changed its policy on cardholder disputes, allowing consumers to initiate the same chargeback procedure as for credit cards. An Interlink cardholder can now initiate a chargeback if a merchant is unwilling to provide the purchased service; shipped merchandise that was never received; failed to provide the goods or services that were described on the documentation presented to the cardholder at the time of purchase; or the merchandise was received damaged or defective. Other PIN-based networks will likely follow Visa's lead to remain competitive.