A Debit Card is a 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made with a debit card, the funds are withdrawn directly from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 bank account. Debit cards use the same underlying
technology as ATMs (bank machines) that dispense cash; authentication
may consist of the use of a numeric PIN (personal identification
number) known only to the cardholder. PINs can be used only
where the POS (point of sale) terminal is properly equipped;
in particular, a separate keypad is needed to allow the customer
to enter his or her PIN and select the account from which
funds should be drawn.
Some 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.
Some POS 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.
Typically, (as of this writing) a "credit" transaction
is without cost to the purchaser while a small fee is charged
for "debit" transactions. Other differences are
that "debit" purchasers may opt to withdraw cash
in addition to the amount of the debit purchase; also, from
the merchant's standpoint, the merchant pays no fee to receive
the proceeds of a "debit" transaction while paying
a percentage of "credit" transactions, just as merchants
pay a fee to process pure credit card 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. Many consumers prefer
"credit" transactions because of the lack of a fee
charged to the consumer/purchaser -- and many POS terminals
now make the "credit" function more difficult to
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 teens as young as 13. The parent
retains a great deal of control over the teen's use of the
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.