What is a debit card?
Debit cards are also known as check cards. Debit cards look like credit cards or ATM (automated teller machine) cards, but operate like cash or a personal check. Debit cards are different from credit cards. While a credit card is a way to “pay later,” a debit card is a way to “pay now.” When you use a debit card, your money is quickly deducted from your checking or savings account.
As opposed to credit cards, which extend a line of credit to a user, debit cards are linked to a user’s checking/savings/money market account. Debit cards are processed in two different ways. A “PIN-based” debit requires the customer to endorse the payment by submitting their Personal Identification Number (PIN) at the point of sale, whereas a “Signature-based” does not require entering a PIN. PIN-based Debit Because the customer enters their PIN code, the likelihood of fraud is greatly reduced. Therefore, merchants are generally charged a lower fee than credit card fees. Signature-based Debit Signature-based debit cards have a Visa or MasterCard logo and are processed like a credit card, meaning no PIN is entered. The merchant generally incurs the same discount rates and fees as credit cards. Merchants can accept signature-based payments via the Internet, telephone, or via a retail terminal.
