How do online and offline debit cards differ?
Cardholders can use either an offline or online debit card to initiate a debit against their demand deposit (checking) account. However, there are differences in the way the transactions are authorized, settled and priced. Similar to making a credit card payment, a cardholder signature authorizes an offline debit card transaction. Offline debit transactions settle through the Visa and MasterCard networks. Cardholders authorize online debit card transactions using their PINs. Online debit transactions clear through the ATM network structure (think STAR or NYCE). Merchants like online debit because the interchange fee is less than the fee for offline debit, which tracks credit card interchange pricing. To accept online debit cards, merchants need PIN pads. Both factors create sales opportunities for the MLS.
