|
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made with a debitcard, the funds are withdrawn directly from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 debitcards 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 dbit crd is generally viewed as superior
to the offline debti 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
debit cards 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 deibt 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 "debit"
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 debit
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" debit
card 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 debit-card 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.
Debit cards and secured credit cards, are popular among
college students who have not yet established a credit history.
There are also forms of debit cards (e.g. Visa Buxx) that
are purchased by parents for teenagers as young as 13. The
parent retains a great deal of control over the child's use
of the cards.
Debit cards are also 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, while debit cards are generally associated
with an individual's bank account. Debit cards usually offer
some protection against loss, theft, or unauthorized use while
stored-value cards usually do not.
See:
• Charge
Card
• Credit
Card
• VISA
Card
This
article is licensed under the GNU
Free Documentation License.
It uses material from the Wikipedia
article "Debit Card".
|
