SAN MATEO, Calif. -- Shoppers' use of debit cards as a checkout payment option could receive a boost from recently announced consumer protections, which include a $50 cap on liability for lost or stolen cards.
Visa U.S.A. here, with 46 million debit cards in circulation, has limited consumers' liability for lost or stolen debit cards to a maximum of $50, with zero liability if the loss is reported within two business days.
The new policies, which apply to credit and debit cards bearing the Visa logo, take effect in November. Visa's move follows a similar announcement last month by MasterCard International, Purchase, N.Y., applying to the 15.6 million MasterMoney debit cards in circulation, taking effect by the end of the year.
Prior to these moves, liability limitations for debit cards, which resemble credit cards but draw funds from a consumer's checking account, were set by federal regulations and ranged from as low as $50 to an unlimited amount.
"If debit cards are perceived as safer, it might increase their usage," said Bernie Rogan, spokesman for Shaw's Supermarkets, East Bridgewater, Mass. He noted the majority of Shaw's customers pay with either cash or checks.
Many retailers have embraced debit cards. One reason is transaction fees charged to retailers are generally lower than those charged for credit cards.
"When we first started looking at accepting debit and credit cards about four years ago, we didn't anticipate they would account for a significant portion of sales," said Stu Denrich, vice president of management information systems at Valu Food, Baltimore. "Now, together they account for 7% to 8% of sales chainwide, and as high as 12% to 15% in certain stores."
While consumer use of the cards industrywide is difficult to measure, consumers are noticing debit cards' availability as a payment option. Of consumers surveyed in Jan. 1996 by the Food Marketing Institute, Washington, 63% said their primary grocery store accepted automated teller machine or debit cards for purchases. By Jan. 1997, the percentage had risen to 68%.
Debit card usage overall has increased dramatically in the past five years. At the end of 1996, 46 million Visa debit cards were in circulation, and 1.2 billion transactions had taken place, according to Visa U.S.A. spokeswoman Carolyn Bretschneider. She said that Visa projects that by 2001, all brands of debit cards will account for 10% of total consumer transactions.
At least 28,000 supermarket locations nationwide currently accept Visa debit cards, said Bretschneider.
MasterCard has also seen significant growth in its debit card business. At the end of 1995, 7.6 million MasterMoney debit cards were in circulation; by the end of 1996, that number had risen to 15.6 million, according to a source at MasterCard International.
"These changes address concerns that consumers had about debit card usage," said Bretschneider. "And because the new policy rewards consumers for early reporting of lost cards, there are ramifications for merchants as well. They should help stamp out excessive fraudulent activity at their point of sale."
Bretschneider noted that fraud losses from all Visa products totaled less than 0.1% of all charges.
Another consumer protection measure announced by Visa concerns new card activation. Previously, some financial institutions had issued "live" debit cards to consumers. But by summer 1998, consumers will have to either call a toll-free number or use their debit card at an ATM in order to activate it, said Bretschneider.