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Debit Card

A debit card is an ISO 7810 card which physically resembles a credit card, and, like a credit card, is used as an alternative to cash when making purchases. However, when purchases are made with a debit card, the funds are withdrawn directly from the purchaser's checking or savings account at a bank.

There are currently two types of debit cards in use: online debit cards and offline debit cards. Online debit cards are essentially enhanced automatic teller machine (ATM) cards, as they use the same personal identification number (PIN) authentication system and debits are reflected in the user’s account immediately. The PIN authentication is much more secure than the alternative signature (used in offline debit cards). One difficulty in using online debitcards is the necessity of a separate keypad at the point of sale (POS) to enter the PIN. Overall, the online debit card is generally viewed as superior to the offline dbeit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may have been forgotten or not authorized by the owner of the card. Some countries, such as Canada, only allow use of online debit cards.

Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard), and are used like a credit card. This type of debit card may be subject to a daily limit, as well as a maximum limit equal to the amount currently deposited in the checking account from which it draws funds. Offline debitcards are not compatible with the PIN system, and therefore can be used with a forged signature, since users are rarely required to present identification. Transactions conducted with offline debit cards usually require 2-3 days to be reflected on users’ account balances. This type of debit card is similar to a secured credit card.

Many debit cards are actually capable of accomplishing both types of transactions, depending on the availability of proper equipment at the POS.

"Credit" and "debit" purchases

Terminals allow the user of a Visa or MasterCard debit card to choose whether the purchase is a "credit" or "debit" purchase. In a "credit" purchase, the user signs a charge slip (as in a traditional credit card purchase); in a "debit" purchase, the user enters a PIN. In either case, the user's bank account is debited.

In some countries and with some merchant service organisations (as of this writing), a "credit" transaction is without cost to the purchaser beyond the face value of the transaction, while a small fee may be charged for "dbeit" transactions (although it is often absorbed by the retailer.) Other differences are that "debit" purchasers may opt to withdraw cash in addition to the amount of the deibit purchase (if the merchant supports that functionality); also, from the merchant's standpoint, the merchant pays lower fees on a "debit" transaction as compared to "credit" transactions.

The fees charged to merchants on "credit" debitcard purchases -- and the lack of fees charged merchants for processing "debit" debit card purchases and paper checks -- have prompted some major merchants to file lawsuits against debitcard transaction processors such as Visa and MasterCard. Visa and MasterCard recently agreed to settle the largest of these lawsuits and agreed to settlements of billions of dollars.

Many consumers prefer "credit" transactions because of the lack of a fee charged to the consumer/purchaser -- and many terminals at PIN-accepting merchant locations now make the "credit" function more difficult to access. Also, in the case of a benign or malicious error by the merchant and/or bank, a debit transaction may cause more serious problems (e.g. money not accessible; overdrawn account) than in the case of a credit or charge card transaction (e.g. credit not accessible; over credit limit).

To the consumer, a debit transaction is real-time; i.e. the money is withdrawn from their account immediately following the authorization request from the merchant. This is in contrast to a typical credit card or charge card transaction which can have a lag time of a few days before the transaction is posted to the account, and many days to a month or more before the consumer makes repayment with actual money.

Also see:

• Online Credit and Loan Applications
• Charge Card
• Credit
• Credit Cards
• Credit Report
• Personal Loans
• Payday Loan
• Payday Lending Guidelines
• Structured Settlement
• Credit Rating Agency
• Arsidian Introduces New Free Online Mortgage & Loan Calculator

• Auto loan

This article is licensed under the GNU Free Documentation License.
It uses material from the Wikipedia article "Debit Card ".