Two Ways of Debit Card Transactions

Debit Cards Are Popular

Debit cards are quickly becoming most popular currency these days. According to Visa, debit cards have surpassed credit cards to become the most common form of Visa point-of-sale (“POS”) transaction in the United States in the year of 2002. And It is expected that they'll likely finally outnumber hand-written checks in 2005.

Debit cards are promoted as safer than cash and more convenient than paper checks. And, for consumers, they are free of the finance charges associated with credit cards.

A debit card is a payment 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 However, when purchases are made with a debit card, the funds are withdrawn directly from the purchaser's account

Consumers value their debit cards because this payment option quickly and securely moves checking account funds without the hassles or risks involved with paper checks.

Two Forms of Debit Transactions

Debit card transactions come in two forms: Online (PIN-based) Debit and Offline (Signature-based) Debit. Online debit transactions call for customers to endorse payments by submitting their personal identification numbers (PINs) at the point of sale, while offline transactions require shoppers to sign sales receipts.

"Credit" or "Debit?"

When making purchases with debit cards, consumers may have an option to choose. Some 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.

1. Online (PIN-based) Debit

Online debit transactions require consumers to submit their personal identification numbers (PINs) at the point of sale. In stores, customers initiate online debit payments by swiping their cards through magnetic card readers and then entering their secret codes into terminal peripherals called PIN pads. These transactions are processed in real time through nationwide ATM networks. Funds in customers' accounts are captured immediately.

2. Offline (Signature-based) Debit

An offline debit transaction is a signature-based transaction, much like a credit card. It requires no personal identification number (PIN) entry by the consumer and the transaction is transmitted through the VISA and MasterCard networks for authorization in a manner similar to that of a credit card.

Offline debit cards carry the logotypes of, and can be used in a manner nearly identical to, major credit cards (e.g. Visa or MasterCard). The use of a debit card in this manner may have a daily limit, with the maximum limit being the amount of money on deposit. A debit card used in this manner is similar to a secured credit card.