The debit card

As a merchant that accepts credit cards one of the most important questions that you need to ask your customers is whether their card is debit or credit. The cards look and feel the same but they are quite different.

When a debit card is swiped the money is transferred from the customer’s bank account directly to a merchant’s account. No line of credit needs to be extended or approved vastly simplifying the process and as a result, reducing the merchant fee that you pay.

The main system that you are using when processing a debit card is known as EFTPOS (Electronic Fund Transfer at Point Of Sale) or PIN debit. All of the major credit card issuers in the United States support this system and issue debit cards using it. Other issuers around the world include Maestro in the UK, Interac in Canada, Carte Bleue in France and UnionPay in China. For many years these cards only worked in the region they were issued meaning an international traveler had to procure another method of payment like cash, a credit card or travelers cheques. It was the rise of the European Union that forced a change and because of that a debit card that works in the US should now work all over the world as well!

EFTPOS was introduced in 1982 in the US as an attempt to get various nationwide financial systems to communicate with each other and expand their coverage. Both credit and debit cards were included in coverage but it was slow to be adopted. The rise of the Internet changed that and by 2002 it became the standard method of payment to merchants replacing cash. Australia and New Zealand were the first international markets to make the switch in 1985.

There are other forms of debit cards as well, though much less common. Offline debit cards are used like credit cards but may have a daily limit or a maximum limit. These cards are found in Europe mostly. Electronic purse cards store a value on a chip and funds are deducted from that value. These types of cards were popular in Europe in the 1990s in countries like Belgium and the Netherlands but have been phased out. They are still in use in Austria and Germany though. Perhaps the most popular alternative is the prepaid debit card. This is a popular option in the US for people who need or want the convenience a card offers but do not have a bank account. Money is added to the card and it can be then used as any debit card would be. Anyone can acquire one and as it is backed by either Visa or MasterCard it can be used anywhere in the US. The Federal government uses these types of cards for benefit payments to those who do not have bank accounts.