A
debit card (also known as a
bank
card or
check card) is a plastic card
that provides an alternative payment method to
cash when making purchases. Functionally, it can be
called an electronic cheque, as the funds are withdrawn directly
from either the
bank account, or from
the remaining balance on the card. In some cases, the cards are
designed exclusively for use on the Internet, and so there is no
physical card.
The use of debit cards has become widespread in many countries and
has overtaken the cheque, and in some instances cash transactions
by volume. Like
credit cards, debit
cards are used widely for telephone and Internet purchases, and
unlike credit cards the funds are transferred from the bearer's
bank account instead of having the bearer to pay back on a later
date.
Debit cards can also allow for instant withdrawal of cash, acting
as the
ATM card for withdrawing cash and as
a cheque guarantee card. Merchants can also offer
"cashback"/"cashout" facilities to customers, where a customer can
withdraw cash along with their purchase.
Credit or Debit?
For consumers, the difference between a "debit card" and a "credit
card" is that the debit card deducts the balance from a deposit
account, like a checking account, whereas the credit card allows
the consumer to spend money on
credit to the issuing bank. In other words,
a debit card uses the money you have and a credit card uses the
money you don't have."Debit cards" which are linked directly to a
checking account are sometimes dual-purpose, so that they can be
used as a credit card, and can be charged by merchants using the
traditional credit networks. A merchant will ask for "credit or
debit?" if the card is a combined credit+debit card. If the payee
chooses "credit", the credit balance will be debited the amount of
the purchase which is then withdrawn at a later date; if the payee
chooses "debit", the bank account balance will be debited the
amount of the purchase and the money will be withdrawn from the
bank account immediately. Another option is to have a credit
connected to the bank account so that if there is no money on it,
the bank allows some negative balance according to a credit
agreement. Then the customer does not have to choose credit or
debit, the debit card turns into a credit card if there is not
enough account balance.
The "debit" networks usually require that a
personal identification
number (PIN) be supplied. The "credit" networks typically
require that purchases be made in person and often allow cards to
be charged with only a signature, and/or picture ID. However, most
merchant agreements in the United States forbid picture ID as a
requirement to use a Credit Card. This varies between countries,
and in for example Sweden most merchants require picture ID unless
a PIN code is used, or banks won't cover merchant losses for stolen
cards.
Types of debit card
Debit card
[[Image:CCardFront.svg|thumb|right|225px|An example of the front of
a typical debit card:
- Issuing bank logo
- EMV chip
- Hologram
- Card number
- Card brand logo
- Expiration date
- Cardholder's name
]][[Image:CCardBack.svg|thumb|right|225px|An example of the reverse
side of a typical debit card:
- Magnetic
stripe
- Signature strip
- Card Security Code
]]
There are currently three ways that debit card transactions are
processed:
online debit (also known as
PIN
debit),
offline debit (also known as
signature debit) and
Electronic Purse
Card.
Although
many debit cards are of the Visa
or MasterCard brand, there are many other
types of debit card, each accepted only within a particular country
or region, for example Switch
(now: Maestro) and Solo in the
United
Kingdom
, Interac in Canada
, Carte Bleue in France
, Laser in Ireland
, "EC electronic cash" (formerly Eurocheque) in Germany
and EFTPOS cards in Australia and New Zealand.
The need
for cross-border
compatibility and the advent of the euro
recently led to many of these card networks (such as Switzerland
's "EC direkt", Austria
's
"Bankomatkasse" and Switch in
the United
Kingdom) being re-branded with the internationally
recognised Maestro logo, which
is part of the MasterCard brand.
Some debit cards are dual branded with the logo of the (former)
national card as well as
Maestro (e.g. EC cards in Germany,
Laser cards in Ireland, Switch and Solo in the UK, Pinpas cards in
the Netherlands, Bancontact cards in Belgium, etc.). The use of a
debit card system allows operators to package their product more
effectively while monitoring customer spending. An example of one
of these systems is ECS by
Embed
International.
Online Debit Card
Online debit cards require electronic authorization of every
transaction and the debits are reflected in the user’s account
immediately. The transaction may be additionally secured with the
personal identification
number (PIN)
authentication
system and some online cards require such authentication for every
transaction, essentially becoming enhanced
automatic teller machine cards. One difficulty in using online debit cards
is the necessity of an electronic authorization device at the
point of sale (POS) and sometimes also
a separate
PINpad to enter the PIN, although
this is becoming commonplace for all card transactions in many
countries. Overall, the online debit card is generally viewed as
superior to the offline debit card because of its more secure
authentication system and live status, which alleviates problems
with processing
lag on transactions that may
have been forgotten or not authorized by the owner of the card.
Banks in
some countries, such as Canada and Brazil
, only issue
online debit cards(santu)
Offline Debit Card
Offline debit cards have the
logos of major
credit cards (e.g.
Visa or
MasterCard) or major debit cards (e.g.
Maestro in the United Kingdom and other countries, but not the United States
) and are used at the point
of sale like a credit card (with payer's signature).
This type of debit card may be subject to a daily limit, and/or a
maximum limit equal to the current/checking account balance from
which it draws funds. Transactions conducted with offline debit
cards require 2–3 days to be reflected on users’ account
balances.In some countries and with some banks and merchant service
organizations, a "credit" or offline debit transaction is without
cost to the purchaser beyond the face value of the transaction,
while a small fee may be charged for a "debit" or online debit
transaction (although it is often absorbed by the
retailer). Other differences are that online debit
purchasers may opt to withdraw cash in addition to the amount of
the debit purchase (if the merchant supports that functionality);
also, from the merchant's standpoint, the merchant pays lower fees
on online debit transaction as compared to "credit" (offline) debit
transaction
Prepaid Debit Card
Prepaid debit cards, also called reloadable debit cards or
reloadable
prepaid cards, are often
used for recurring payments. The payer loads funds to the
cardholder's card account. Particularly for US-based companies with
a large number of payment recipients abroad, prepaid debit cards
allow the delivery of international payments without the delays and
fees associated with international checks and bank transfers.
Web-based services such as stock photography websites (
istockphoto), outsourced services (
oDesk), and affiliate networks (
MediaWhiz) have all started offering prepaid debit
cards for their contributors/freelancers/vendo
Electronic Purse Card
Smart-card-based electronic purse systems
(in which value is stored on the card chip, not in an externally
recorded account, so that machines accepting the card need no
network connectivity) are in use throughout Europe since the
mid-1990s, most notably in Germany (Geldkarte), Austria (Quick),
and Belgium. In Austria and Germany, all current bank cards now
include electronic purses.
Advantages and Disadvantages
Debit and check cards, as they have become widespread, have
revealed numerous advantages and disadvantages to the consumer and
retailer alike. Advantages are as follows (most of them applying
only to a some countries, but the countries to which they apply are
unspecified):
- A consumer who is not credit worthy and may find it difficult
or impossible to obtain a credit card can more easily obtain a
debit card, allowing him/her to make plastic transactions.
- Use of a debit card is limited to the existing funds in the
account to which it is linked (except cases of offline payments),
thereby preventing the consumer from racking up debt as a result of
its use, or being charged interest, late
fees, or fees exclusive to credit cards.
- For most transactions, a check card can be used to avoid check
writing altogether. Check cards debit funds from the user's account
on the spot, thereby finalizing the transaction at the time of
purchase, and bypassing the requirement to pay a credit card bill
at a later date, or to write an insecure check containing the
account holder's personal information.
- Like credit cards, debit cards are accepted by merchants with
less identification and scrutiny than personal checks, thereby
making transactions quicker and less intrusive. Unlike personal
checks, merchants generally do not believe that a payment via a
debit card may be later dishonored.
- Unlike a credit card, which charges higher fees and interest
rates when a cash advance is obtained, a debit card may be used to
obtain cash from an ATM or a PIN-based transaction at no extra
charge, other than a foreign ATM fee.
The Debit card has many disadvantages as opposed to cash or credit:
- Many banks are now charging over-limit fees or non-sufficient
funds fees based upon pre-authorizations, and even attempted but
refused transactions by the merchant (some of which may not even be
known by the client).
- Many merchants mistakenly believe that amounts owed can be
"taken" from a customer's account after a debit card (or number)
has been presented, without agreement as to date, payee name,
amount and currency, thus causing penalty fees for overdrafts,
over-the-limit, amounts not available causing further rejections or
overdrafts, and rejected transactions by some banks.
- In some countries debit cards offer lower levels of security
protection than credit cards. Theft of the users PIN using skimming
devices can be accomplished much easier with a PIN input than with
a signature-based credit transaction. However, theft of users' PIN
codes using skimming devices can be equally easily accomplished
with a debit transaction PIN input, as with a credit transation PIN
input, and theft using a signature-based credit transaction is
equally easy as theft using a signature-based debit
transaction.
- In many places, laws protect the consumer from fraud much less
than with a credit card. While the holder of a credit card is
legally responsible for only a minimal amount of a fraudulent
transaction made with a credit card, which is often waived by the
bank, the consumer may be held liable for hundreds of dollars, or
even the entire value of fraudulent debit transactions. The
consumer also has a shorter time (usually just two days) to report
such fraud to the bank in order to be eligible for such a waiver
with a debit card, whereas with a credit card, this time may be up
to 60 days. A thief who obtains or clones a debit card along with
its PIN may be able to clean out the consumer's bank account, and
the consumer will have no recourse.
Federally Imposed Maximum Liability for
Unauthorized Card Use (United States)
| Reported |
Maximum Card Holder Liability |
| Credit Card |
Debit Card |
| Before Use |
$0 |
$0 |
| Within 2 business days |
$50 |
$50 |
| After 2 but before 60 business days |
$50 |
$500 |
| After 60 business days |
Unlimited |
Unlimited |
- In the
UK and Ireland, among other countries, a consumer who purchases
goods or services with a credit card can pursue the credit card
issuer if the goods or services are not delivered or are
unmerchantable. While they must generally exhaust the
process provided by the retailer first, this is not necessary if
the retailer has gone out of business. This protection is not
provided by legislation when using a debit card but may be offered
to a limited extent as a benefit provided by the card network, e.g.
Visa debit cards.
- When a transaction is made using a credit card, the bank's
money is being spent, and therefore, the bank has a vested interest
in claiming its money where there is fraud or a dispute. The bank
may fight to void the charges of a consumer who is dissatisfied
with a purchase, or who has otherwise been treated unfairly by the
merchant. But when a debit purchase is made, the consumer has spent
his/her own money, and the bank has little if any motivation to
collect the funds.
- In some countries, and for certain types of purchases, such as
gasoline (via a pay at the pump system), lodging, or car rental,
the bank may place a hold on funds much greater than the actual
purchase for a fixed period of time. However, this isn't the case
in other countries, such as Sweden. Until the hold is released, any
other transactions presented to the account, including checks, may
be dishonoured, or may be paid at the expense of an overdraft fee if the account lacks any additional
funds to pay those items.
- While debit cards bearing the logo of a major credit card are
accepted for virtually all transactions where an equivalent credit
card is taken, a major exception in some countries is at car rental
facilities. In some countries car rental agencies require an actual
credit card to be used, or at the very least, will verify the
creditworthiness of the renter using a debit card. In these
unspecified countries, these companies will deny a rental to anyone
who does not fit the requirements, and such a credit check may
actually hurt one's credit score, as
long as there is such a thing as a credit score in the country of
purchase and/or the country of residence of the customer.
Consumer Protection
Consumer protections vary, depending on the network used. Visa and
MasterCard, for instance, prohibit minimum and maximum purchase
sizes, surcharges, and arbitrary security procedures on the part of
merchants. Merchants are usually charged higher transaction fees
for credit transactions, since debit network transactions are less
likely to be fraudulent. This may lead them to "steer" customers to
debit transactions. Consumers disputing charges may find it easier
to do so with a credit card, since the money will not immediately
leave their control. Fraudulent charges on a debit card can also
cause problems with a
checking
account because the money is withdrawn immediately and may thus
result in an overdraft or
bounced
checks. In some cases debit card-issuing banks will promptly
refund any disputed charges until the matter can be settled, and in
some jurisdictions the consumer liability for unauthorized charges
is the same for both debit and credit cards.
In some countries, like India and Sweden, the consumer protection
is the same regardless of the network used. Some banks set minimum
and maximum purchase sizes, mostly for online-only cards. However,
this has nothing to do with the card networks, but rather with the
bank's judgement of the person's age and credit records. Any fees
that the customers have to pay to the bank are the same regardless
of whether the transaction is conducted as a credit or as a debit
transaction, so there is no advantage for the customers to choose
one transaction mode over another. Shops may add surcharges to the
price of the goods or services in accordance with laws allowing
them to do so. Banks consider the purchases as having been made at
the moment when the card was swiped, regardless of when the
purchase settlement was made. Regardless of which transaction type
was used, the purchase may result in an overdraft because the money
is considered to have left the account at the moment of the card
swiping.
Financial access
Debit cards and
secured credit
cards are popular among college students who have not yet
established a credit history. Debit cards may also be used by
expatriated workers to send money home to
their families holding an affiliated debit card.
Issues with deferred posting of offline debit
To the consumer, a debit transaction is perceived as occurring in
real-time;
i.e. the money is withdrawn from their account
immediately following the authorization request from the merchant,
which in many countries, is the case when making an online debit
purchase. However, when a purchase is made using the "credit"
(offline debit) option, the transaction merely places an
authorization hold on the customer's
account; funds are not actually withdrawn until the transaction is
reconciled and hard-posted to the customer's account, usually a few
days later. However, the previous sentence applies to all kinds of
transaction types, at least when using a card issued by a European
bank. This is in contrast to a typical credit card transaction;
though it can also have a lag time of a few days before the
transaction is posted to the account, it can be many days to a
month or more before the consumer makes repayment with actual
money.
Because of this, in the case of a benign or malicious error by the
merchant or bank, a debit transaction may cause more serious
problems (e.g. money not accessible; overdrawn account) than in the
case of a credit card transaction (e.g. credit not accessible; over
credit limit).
This is especially
true in the United
States, where cheque fraud is
a crime in every state, but exceeding your credit limit is
not.
Internet purchases
Debit cards may also be used on the Internet. Internet transactions
may be conducted in either online or offline mode, although shops
accepting online-only cards are rare in some countries (such as
Sweden), while they are common in other countries (such as the
Netherlands). For a comparison,
PayPal offers
the customer to use an online-only Maestro card if the customer
enters a Dutch address of residence, but not if the same customer
enters a Swedish address of residence.
Internet purchases may be conducted in either online or offline
mode, and just as in the case where you use your card in a shop, it
is (at least in most countries) impossible to tell whether the
transaction was conducted in online or offline mode (unless an
online-only card was used, in which case you know that it was
conducted in online mode), since the mode isn't mentioned on any
receipt or similar. Internet purchases use neither a PIN code nor a
signature for identification. Transactions may be conducted in
either credit or debit mode (which is sometimes, but not always,
indicated on the receipt), and this has nothing to do with whether
the transaction was conducted on online or offline mode, since both
credit and debit transactions may be conducted in both modes.
Debit cards around the world
In some countries, banks tend to levy a small fee for each debit
card transaction. In some countries (e.g. the UK) the merchants
bear all the costs and customers are not charged. There are many
people who routinely use debit cards for all transactions, no
matter how small. Some (small) retailers refuse to accept debit
cards for small transactions, where paying the transaction fee
would absorb the
profit margin on the
sale, making the transaction uneconomic for the retailer.
Australia
Debit cards in
Australia are called
different names depending on the issuing bank:
Commonwealth Bank of Australia:
Keycard;
Westpac Banking
Corporation:
Handycard;
National Australia Bank:
FlexiCard;
ANZ Bank:
Access card;
Bendigo
Bank:
Cashcard.
EFTPOS is very popular in Australia and has been operating there
since the 1980s. EFTPOS-enabled cards are accepted at almost all
swipe terminals able to accept
credit
cards, regardless of the bank that issued the card, including
Maestro cards issued by foreign
banks, with most businesses accepting them, with 450,000 Point Of
Sale terminals.
EFTPOS cards can also be used to deposit and withdraw cash over the
counter at
Australia Post outlets
participating in giroPost, just as if the transaction was conducted
at a bank branch, even if the bank branch is closed. Electronic
transactions in Australia are generally processed via the
Telstra Argent and
Optus Transact Plus network - which has
recently superseded the old
Transcend network in the last few years.
Most early keycards were only usable for EFTPOS and at ATM or bank
branches, whilst the new debit card system works in the same ways a
credit card, except it will only use funds in the specified bank
account. This means that, among other advantages, the new system is
suitable for electronic purchases without a delay of 2 to 4 days
for bank-to-bank money transfers.
Australia operates both electronic credit card transaction
authorization and traditional EFTPOS debit card authorization
systems, the difference between the two being that EFTPOS
transactions are authorized by a personal identification number
(PIN) while credit card transactions are usually authorized by the
printing and signing of a receipt. If the user fails to enter the
correct pin 3 times, the consequences range from the card being
locked out and requiring a phone call or trip to the branch to
reactivate with a new PIN, the card being cut up by the merchant,
or in the case of an ATM, being kept inside the machine, both of
which require a new card to be ordered.
Generally credit card transaction costs are borne by the merchant
with no fee applied to the end user while EFTPOS transactions cost
the consumer an applicable withdrawal fee charged by their
bank.
The introduction of
Visa and
MasterCard debit cards along with regulation in
the settlement fees charged by the operators of both EFTPOS and
credit cards by the Reserve Bank has seen a continuation in the
increasing ubiquity of credit card use among Australians and a
general decline in the profile of EFTPOS. However, the regulation
of settlement fees also removed the ability of banks, who typically
provide merchant services to retailers on behalf of Visa,
MasterCard or
Bankcard, from stopping those
retailers charging extra fees to take payment by credit card
instead of cash or EFTPOS. Though only a few operators with strong
market power have done so, the passing on of fees charged for
credit card transactions may result in an increased use of
EFTPOS.
Canada
Canada has a
nation-wide EFTPOS system, called Interac Direct
Payment. Since being introduced in 1994, IDP has become
the most popular payment method in the country. Previously, debit
cards have been in used for
ABM usage since the early 1980s. In
the early 1990s, pilot projects were conducted among Canada's six
largest banks to gauge security, accuracy and feasibility of the
Interac system. Slowly in the later half of the 1990s, it was
estimated that approximately 50% of retailers offered Interac as a
source of payment. Retailers, many small transaction retailers like
coffee shops, resisted offering IDP to promote faster service. In
2009, 99% of retailers offer IDP as an alternative payment
form.
In Canada, the debit card is sometimes referred to as a "bank
card". It is a client card issued by a bank that provides access to
funds and other bank account transactions, such as transferring
funds, checking balances, paying bills, etc., as well as point of
purchase transactions connected on the
Interac network. Since its national launch in 1994,
Interac Direct Payment has become so widespread that, as of 2001,
more transactions in Canada were completed using debit cards than
cash. This popularity may be partially attributable to two main
factors: the convenience of not having to carry cash, and the
availability of automated bank machines (ABMs) and Direct Payment
merchants on the network.
Canadians, in fact, rank as the undisputed world leaders in debit
card use,making 71.7 debit transactions per person in 2001, which
is significantly more than consumers in the next closest country
(France, at 60.3). The average value of a debit transaction in
Canada (US$27 in 2001) was the lowest in an 11-country comparison,
with Japan (US$405) and Switzerland (US$100) markedly standing
out.93 Thus, compared to consumers in other countries, Canadians
appear to be using their debit cards more often, even for frequent
low-cost transactions.
Debit cards may be considered 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 and are only usable at the issuer, while debit cards are
generally associated with an individual's bank account and can be
used anywhere on the
Interac network.
In Canada, the bank cards can only be used at POS and ABMs. Select
financial institutions allow their clients to use their debit cards
in the United States on the NYCE network.
Consumer protection in Canada
Consumers in Canada are protected under a voluntary code* entered
into by all providers of debit card services, The Canadian Code of
Practice for Consumer Debit Card Services (sometimes called the
"Debit Card Code"). Adherence to the Code is overseen by the
Financial Consumer
Agency of Canada (FCAC), which investigates consumer
complaints.
According to the FCAC website, revisions to the Code that came into
effect in 2005 put the onus on the financial institution to prove
that a consumer was responsible for a disputed transaction, and
also place a limit on the number of days that an account can be
frozen during the financial institution's investigation of a
transaction.
Chile
Chile
has an
EFTPOS system called Redcompra (Purchase Network) which is
currently used in at least 23,000 establishments throughout the
country. Goods may be purchased using this system at most
supermarkets, retail stores, pubs and restaurants in major urban
centers.
Colombia
Colombia
has a system called
Redeban-Multicolor and Credibanco
Visa which are currently used in at least 23,000
establishments throughout the country. Goods may be
purchased using this system at most supermarkets, retail stores,
pubs and restaurants in major urban centers. Colombian debit cards
are Maestro (pin), Visa Electron (pin), Visa Debit (as Credit) and
MasterCard-Debit (as Credit).
Denmark
The
Danish debit card Dankort was introduced on
1 September 1983, and despite the initial transactions being
paper-based, the Dankort quickly won widespread acceptance in
Denmark
. By 1985 the first
EFTPOS terminals were introduced, and 1985 was also
the year when the number of Dankort transactions first exceeded 1
million.
Miscellaneous facts & numbers
- In 2007 PBS, the Danish operator of the
Dankort system, processed a total of 737 million Dankort
transactions. Of these, 4.5 million just on a single day, 21
December. This remains the current record.
- At the end of 2007, there were 3,9 million Dankort in
existence.
- More than 80,000 Danish shops have a Dankort terminal. Another
11,000 internet shops also accept the Dankort.
France
Banks in France charge annual fees for debit cards (despite card
payments being very cost efficient for the banks), yet they do not
charge personal customers for checkbooks or processing checks
(despite checks being very costly for the banks). This imbalance
most probably dates from the unilateral introduction in France of
Chip and PIN debit cards in the early
1990s, when the cost of this technology was much higher than it is
now.
Credit cards of the type found in the United
Kingdom and United
States are unusual in France and the closest equivalent is
the deferred debit card, which operates like a normal debit card,
except that all purchase transactions are postponed until the end
of the month, thereby giving the customer between 1 and 31 days of
interest-free credit. The annual fee for a deferred debit
card is around €10 more than for one with immediate debit. Most
France debit cards are branded with the
Carte Bleue logo, which assures acceptance
throughout France. Most card holders choose to pay around €5 more
in their annual fee to additionally have a
Visa or a
MasterCard logo on their
Carte Bleue, so that the card is accepted
internationally. A
Carte Bleue without a
Visa or a
MasterCard logo is often known as a
"
Carte Bleue Nationale" and a
Carte Bleue with a
Visa or a
MasterCard logo is known as a
"
Carte Bleue Internationale", or more
frequently, simply called a "Visa" or "MasterCard". Many smaller
merchants in France refuse to accept debit cards for transactions
under a certain amount because of the minimum fee charged by
merchants' banks per transaction (this minimum amount varies from
5€ to 15€, or in some rare case even more). But more and more
merchants accept debit cards for small amounts, due to the massive
daily use of debit card nowadays. Merchants in France do not
differentiate between debit and credit cards, and so both have
equal acceptance. Visa's and MasterCard's regulations prohibit
merchants from setting minimum charge amounts. This is legal in
France to set a minimum amount to transactions but the merchants
must display it clearly. American Express's policy is to discourage
any merchant practices that create a "barrier to acceptance" and
setting minimum charge limits is such a barrier. Amex does prohibit
"discrimination" against the Amex card, which means they cannot
have minimum charge for Amex but not for Visa and MasterCard.
Germany
Debit
cards have enjoyed wide acceptance in Germany for
years. Facilities already existed before EFTPOS became
popular with the
Eurocheque card, an
authorization system initially developed for paper
checks where, in addition to signing the actual
check, customers also needed to show the card alongside the check
as a security measure. Those cards could also be used at ATM
Terminals and for card-based
electronic funds transfer (called
Girocard). These are now
the only functions of such cards: the Eurocheque system (along with
the brand) was abandoned in 2002 during the transition from the
Deutsche Mark to the
euro. As of 2005, most stores and petrol outlets have
EFTPOS facilities. Processing fees are paid by the businesses,
which leads to some business owners refusing debit card payments
for sales totalling less than a certain amount, usually 5 or 10
euro.
To avoid the processing fees, many businesses resorted to using
direct debit, which is
then called
electronic direct debit' ( ,
abbr. ELV).
The point-of-sale terminal reads the name and account
number from the card but instead of handling the transaction
through the ec network it simply prints a form, which the customer
signs to authorise the debit note.
However, this method also avoids any verification or
payment guarantee provided by the network.
Further, customers can return debit notes by notifying
their bank without giving a reason. This
means that the beneficiary bears the risk of fraud and
illiquidity. Some business mitigate the
risk by consulting a proprietary blacklist
or by switching to electronic cash for higher transaction
amounts.
Around 2000, an
Electronic Purse Card was
introduced, dubbed
Geldkarte ("money card"). It makes use of
the
smart card chip on the front of the
standard issue debit card. This chip can be charged with up to 200
euro, and is advertised as a means of making medium to very small
payments, even down to several euros or cent payments. The key
factor here is that no processing fees are deducted by banks. It
did not gain the popularity its inventors had hoped for. However,
this could change as this chip is now used as means of age
verification at cigarette vending machines, which has been
mandatory since January 2007. Furthermore, some payment discounts
are being offered (
e.g. a 10% reduction for public
transport fares) when paying with "Geldkarte". The "Geldkarte"
payment lacks all security measures, since it does not require the
user to enter a PIN or sign a sales slip: the loss of a "Geldkarte"
is similar to the loss of a wallet or purse - anyone who finds it
can then use their find to pay for their own purchases.
Hong Kong
The Octopus card, a stored value
contactless smart card, was initially
launched in September 1997 to collect fares for the city's mass
transit system. Since then, the Octopus system has become widely
used for payments for virtually all public transport in Hong Kong,
as well as convenience stores, fast food restaurants, parking
meters, car parks, service stations and vending machines. Over 18
million Octopus cards are in circulation, and 95% of Hong Kong
people aged 16–65 use Octopus.One other popular payment method that
is widely used in Hong Kong which is similar to the debit card is
called EPS. EPS is a payment method that lets customers use their
ATM Card like a debit card. Most of the big banks in Hong Kong
provide the customer with an ATM card with EPS.
Hungary
In
Hungary
debit cards are far more common and popular than
credit cards. Many Hungarians even refer to their debit card
("betéti kártya") mistakenly using the word for credit card
("hitelkártya").
India
The debit
card has limited popularity in India
as the
merchant is charged for each transaction. The debit card
therefore is mostly used for
ATM transactions. Most of the banks
issue
VISA debit cards, while some
banks (like
SBI) issue
Maestro cards. The debit card
transactions are routed through the
VISA or
MasterCard
networks rather than directly via the issuing bank.
Italy
Debit cards are quite popular in Italy. There are both classic and
prepaid cards. The main classic debit card in Italy is
PagoBancomat: this kind of card is issued by Italian banks, often
with a credit card (so you get a dual mode card). It allows access
to the owner's bank account funds and it is widely accepted in most
shops, although on the Internet it is allowed only the credit card
mode. The major debit prepayed card is issued by Poste Italiane
S.p.A., is called Postepay and runs on the Visa Electron circuit.
It can be used on Poste Italiane's ATMs (Postamat) and on Visa
Electron-compatible bank ATMs all over the world. It has no fees
when used on the Internet and in POS-based transactions. Other
cards are issued by other companies, such as Vodafone CashCard,
Banca di Milano's Carta Jeans and Carta Moneta Online.
Japan
In
Japan
people usually use their , originally intended only
for use with cash machines, as debit cards. The debit
functionality of these cards is usually referred to as , and only
cash cards from certain banks can be used. A cash card has the same
size as a VISA/MasterCard. As identification, the user will have to
enter his or her four-digit PIN when paying. J-Debit was started in
Japan on March 6, 2000.
Suruga Bank began service of Japan's
first
Visa Debit in 2006.
Ebank will start service of Visa Debit by the
end of 2007.
Kuwait
In Kuwait, all banks provide a debit card to their account holders.
This card is branded as KNET, which is the central switch in
Kuwait. KNET card transactions are free for both customer and the
merchant and therefore KNET debit cards are used for low valued
transactions as well. KNET cards are mostly co-branded as Maestro
or Visa Electron which makes it possible to use the same card
outside Kuwait on any terminal supporting these payment
schemes.
The Netherlands
In the
Netherlands
using EFTPOS is known as
pinnen (pinning), a term derived from the
use of a Personal
Identification Number. PINs are also used for
ATM transactions, and the term is
used interchangeably by many people, although it was introduced as
a marketing brand for EFTPOS. The system was launched in 1987, and
in 2006 there were 166,375 terminals throughout the country,
including mobile terminals used by delivery services and on
markets. All banks offer a debit card suitable for EFTPOS with
current accounts.
PIN transactions are usually free to the customer, but the retailer
is charged per-transaction and monthly fees.
Equens, an association with all major banks as its
members, runs the system, and until August 2005 also charged for
it. Responding to allegations of monopoly abuse, it has handed over
contractual responsibilities to its member banks, who now offer
competing contracts. Interpay, a legal predecessor of Equens, was
fined EUR 47 million in 2004, but the fine was later dropped, and a
related fine for banks was lowered from EUR 17 to €14 million.
Per-transaction fees are between 5-10 eurocents, depending on
volume.
Credit cards use in the Netherlands is very low, and most credit
cards cannot be used with EFTPOS, or charge very high fees to the
customer. Debit cards can often, though not always, be used in the
entire EU for EFTPOS. Most debit cards are
Maestro cards.
Electronic Purse Cards (called
Chipknip) were introduced in 1996, but
have never become very popular.
New Zealand
The
EFTPOS (electronic fund transfer at
point of sale) system is highly
popular in New
Zealand
, with more debit card terminals per head of
population than any other country, and being used for about 60% of
all retail transactions. According to the largest EFTPOS
network provider, "New Zealanders use EFTPOS twice as much as any
other country."
It is not unusual for a New Zealander to have more than one EFTPOS
card and for banks to offer fixed monthly fees for unlimited (100
or greater at least) EFTPOS transactions during that month. During
peak spending times, e.g. around Christmas, or during extreme
fluctuations, the New Zealand EFTPOS system can become overloaded
and 'crash' due to the sheer number of transactions being
processed.
Virtually all retail outlets have EFTPOS terminals, particularly
supermarkets, "dairies" (convenience stores), service stations, and
bars. Increasingly Taxi operators, businesses operating from stands
at events and even pizza delivery people have mobile EFTPOS
terminals.
New Zealanders use EFTPOS for both small and large transactions. It
would not be unusual for a New Zealander to use an EFTPOS card to
pay for an amount as small as 50 cents
NZD. Because EFTPOS is such an integral
part of spending in New Zealand, rare network failures cause
tremendous delays, inconvenience and lost income to businesses who
must resort to manual "zip-zap" swipe machines to process EFTPOS
transactions until the network returns to service.Typically New
Zealand merchants do not pay a fee per transaction as is the case
in Australia and other countries. Transaction fees are typically
borne by the customer, and retailers pay a fixed monthly equipment
rental fee. As bank accounts for students and children under 18
years old typically attract low or no electronic transaction fees,
the use of EFTPOS by the younger generations has become virtually
ubiquitous. In recent times, major banks have started to offer
accounts with no EFTPOS transaction fees.
The
Bank of New Zealand introduced
EFTPOS to New
Zealand in 1985 through a pilot scheme with petrol
stations.
EFTPOS is operated through two primary networks. One, EFTPOS NZ,
owned by
ANZ, and a second
operated by
Electronic Transaction
Services Limited which is owned by
ASB
Bank,
Westpac, and the
Bank of New Zealand. The ETSL network
processes approximately 80% of all EFTPOS transactions in New
Zealand on their Paymark EFTPOS network and has over 60,000 points
of sale.
During July 2006 the five billionth EFTPOS payment flowed across
the ETSL/Paymark EFTPOS network since the electronic form of
payment was introduced in New Zealand in 1989.
On 9 May 2007,
Payment Express was
certified as the first IP / broadband certified terminal allowing
EFTPOS transactions to be transmitted securely over the
Internet.
However security issues regarding EFTPOS payments over the public
Internet and the costs associated with legacy (dial up) terminal
replacement has hampered the growth of the IP medium in New
Zealand. One company, Merchant IP Services (MIPS) offers an
alternative IP-POS solution allowing for the secure IP connection
of most legacy (dial-up) terminals without the need for terminal
replacement. The PCI compliant and Paymark certified MIPS IP-POS
system consists of a MIPS WebNAC connected to the legacy EFTPOS
terminal converting dial up transaction data to IP before
transporting the payment securely to the bank switch.
In March 2008 ETSL Paymark partnered with
virtual wallet payment system
pago to create New
Zealands first debit or "stored value" system for online
shopping.
Philippines
In the
Philippines
, all three national ATM network consortia offer
proprietary PIN debit. This was first offered by
Express Payment System in 1987,
followed by
Megalink with
Paylink in 1993 then
BancNet with the
Point-of-Sale in 1994.
Express Payment System or EPS
was the pioneer provider, having launched the service in 1987 on
behalf of the
Bank of the
Philippine Islands. The EPS service has subsequently been
extended in late 2005 to include the other Expressnet members:
Banco de Oro and
Land Bank of the Philippines.
They currently operate 10,000 terminals for their
cardholders.
Megalink launched Paylink EFTPOS system in
1993. Terminal services are provided by Equitable Card Network on
behalf of the consortium.
Service is available in 2,000 terminals,
mostly in Metro
Manila
.
BancNet introduced their
Point of sale System in 1994 as the first
consortium-operated EFTPOS service in the country. The service is
available in over 1,400 locations throughout the Philippines,
including second and third-class municipalities.
In 2005, BancNet
signed a Memorandum of Agreement to serve as the local gateway for
China UnionPay, the sole ATM switch
in the People's
Republic of China
. This will allow the estimated 1.0 billion
Chinese ATM cardholders to use the BancNet ATMs and the EFTPOS in
all
SM Supermalls.
Visa Debit cards are issued by
Union Bank of the Philippines
(e-Wallet & eon),
Chinatrust,
Equicom Savings Bank (Key Card
& Cash Card) & Sterling Bank of Asia (VISA ShopNPay prepaid
and debit cards). Union Bank of the Philippines cards &
Sterling Bank of Asia EMV cards which can also be used for internet
purchases.
Sterling Bank of
Asia has released its first line of prepaid and debit Visa
cards with
EMV chip.
MasterCard debit cards, also known as MasterCard
PayPass cards are issued by
Banco de
Oro. MasterCard Electronic cards are issued by BPI (Express
Cash) and
Security Bank (CashLink
Plus). All VISA and MasterCard based debit cards in the Philippines
are non-embossed and are marked either for "Electronic Use Only"
(VISA/MasterCard) or "Valid only where MasterCard Electronic is
Accepted" (MasterCard Electronic) You can all so brake it
Poland
In
Poland
, local debit
cards, such as PolCard, have become largely substituted with
international ones, such as Visa, MasterCard, or the unembossed
Visa Electron or Maestro. Most banks in Poland block
Internet and
MOTO transactions with
unembossed cards, requiring the customer
to buy an
embossed card or a card for
Internet/MOTO transactions only . The number of banks which do not
block MOTO transactions on unembossed cards has recently started to
increase.
Russia
With the exception of VISA and Master Card, there are some local
payment system based in general on
Smart
Card technology.
- Sbercard. This payment system was
created by Sberbank around 1995–1996. It
uses BGS
Smartcard Systems AG smart card technology i.e.
DUET. Sberbank was a single retail bank in
USSR
before 1990. De facto this is a payment
system of the SberBank.
- Zolotaya Korona. This card brand
was created in 1994. Zolotay Korona is based on CFT technology.
- STB Card.
This card uses the classic magnetic stripe technology. It almost
fully collapsed after 1998 (GKO crisis) with STB bank failure.
- Union Card. The
card also uses the classic magnetic stripe technology. This card
brand is on the decline. These accounts are being reissued as Visa
or MasterCard accounts.
Nearly every transaction, regardless of brand or system, is
processed as an immediate debit transaction. Non-debit transactions
within these systems have spending limits that are strictly limited
when compared with typical Visa or MasterCard accounts.
Singapore
Singapore's debit service is managed by Network for Electronic
Transfers (NETS), founded by Singapore’s leading banks, DBS, Keppel
Bank, OCBC, OUB, POSB, Tat Lee Bank and UOB in 1985 as a result of
a need for a centralised e-Payment operator.It will deduct money
from your bank directly when you buy things using debits
card.
United Kingdom
In the
UK debit cards
(an integrated EFTPOS system) are an established part of the retail
market and are widely accepted both by bricks and mortar stores and by internet
stores. The term EFTPOS is not widely used by the public,
debit card (or Switch, even when referring to a Visa card) is the
generic term used. Cards commonly in circulation include
Maestro (previously
Switch),
Solo,
Visa Debit
(previously
Visa Delta) and
Visa Electron. Banks do not charge customers
for EFTPOS transactions in the UK, but some retailers make small
charges, particularly where the transaction amount in question is
small. The UK has converted all debit cards in circulation to
Chip and PIN (except for Chip and
Signature cards issued to people with certain disabilities), based
on the
EMV standard, to increase transaction
security; however, PINs are not required for internet
transactions.
In the United Kingdom, banks started to issue debit cards in the
mid 1980s in a bid to reduce the number of cheques being used at
the point of sale, which are costly for the banks to process.
As in
most countries, fees paid by merchants in the United Kingdom to accept credit cards are a percentage of the
transaction amount, which funds card holders' interest-free credit
periods as well as incentive schemes such as points, airmiles or
cashback. Debit cards do not usually have these
characteristics, and so the fee for merchants to accept debit cards
is a low fixed amount, regardless of transaction amount. For very
small amounts, this means it is cheaper for a merchant to accept a
credit card than a debit card. Although merchants won the right
through
The Credit Cards (Price Discrimination) Order 1990 to
charge customers different prices according to the payment method,
few merchants in the UK charge less for payment by debit card than
by credit card, the most notable exceptions being
budget airlines,
travel agents and
IKEA.
Debit cards in the UK lack the advantages offered to holders of
UK-issued credit cards, such as free incentives (points, airmiles,
cashback etc), interest-free credit and protection against
defaulting merchants under
Section 75 of the Consumer Credit Act 1974.
Almost all establishments in the United Kingdom that accept credit
cards also accept debit cards (although not always
Solo and
Visa
Electron), but a minority of merchants, for cost reasons,
accept debit cards and not credit cards (for example the
Post Office and, until 1999,
John Lewis).
United States
In the
U.S., EFTPOS is
universally referred to simply as debit. The same
interbank networks that operate
the
ATM network also
operate the POS network. Most
interbank networks, such as
Pulse,
NYCE,
MAC,
Tyme,
SHAZAM,
STAR, etc. are regional and
do not overlap, however, most ATM/POS networks have agreements to
accept each other's cards. This means that cards issued by one
network will typically work anywhere they accept ATM/POS cards for
payment. For example, a NYCE card will work at a Pulse POS terminal
or ATM, and vice versa. Many debit cards in the United States are
issued with a Visa or MasterCard logo allowing use of their
signature-based networks.
The liability of a U.S. debit card user in case of loss or theft is
up to 50 USD if the loss or theft is reported to the issuing bank
in two business days after the customer notices the loss.
The fees charged to merchants on offline debit purchases—and the
lack of fees charged merchants for processing online debit
purchases and paper checks—have prompted some major merchants in
the U.S. to file
lawsuits against debit-card
transaction processors such as Visa and MasterCard. In 2003, Visa
and MasterCard agreed to settle the largest of these lawsuits and
agreed to
settlement of billions of
dollars.
Some consumers prefer "credit" transactions because of the lack of
a fee charged to the consumer/purchaser; also, a few debit cards in
the U.S. offer rewards for using "credit" (e.g. Washington Mutual's
"WaMoola" and S&T Bank's "Preferred Debit Rewards Card" ).
However, since "credit" costs more for merchants, many terminals at
PIN-accepting merchant locations now make the "credit" function
more difficult to access.
For example, if you swipe a debit card at
Wal-Mart
in the U.S., you are immediately presented with the
PIN screen for online debit; to use offline debit you must press
"cancel" to exit the PIN screen, then press "credit" on the next
screen.
One additional problem surrounding the use of debit cards is their
use at a self-service gas pump like those common in the U.S. The
customer might want to purchase fuel on their debit card, but the
pump's computer does not know how much fuel the customer wants. The
pump is activated by the customer presenting their card to a card
reader (see methods described above) and possibly entering a PIN.
At this point the pump will dispense fuel, though no sales
transaction has completed. The pump has no way of knowing how much
fuel will be sold, nor how much money is available in the
customer’s debit account. In a typical sale transaction, trying to
spend more money than is available in your account (credit or
debit) will result in a "no-sale" alert to the merchant, and the
sale does not occur. At a self-serve fuel pump, the fuel is already
in the customer's tank by the time the bank knows the final sale
price. Several solutions to this problem are in place, such as
denying $1 pre-authorizations when an account holds less than $10
while still allowing transactions for specific amounts, but the
concept of delivering the merchandise before the sales transaction
plagues the debit card system. The commission is sometimes so high
that the gas station sometimes actually loses money when someone
pays for gas with credit. When pay at the pump started in the
1980s, many gas stations offered a discount for paying with cash.
Most of them stopped doing that because the discount did not
significantly increase their cash sales.
2009-07-08: Minimum and Maximum Charges for Visa in USA
The Merchants Agreement for Visa states (page 9, or 14/141 in
PDF):
Always honor valid Visa cards in your acceptance category,
regardless of thedollar amount of the purchase. Imposing minimum or
maximum purchaseamounts in order to accept a Visa card transaction
is a violation of the Visa rules.
The file is located at:
FSA, HRA, and HSA debit cards
In the
U.S.A
, a FSA debit card
only allows medical expenses. It is used by some banks for
withdrawals from their
FSAs,
MSA, and
HSA as well. They have
Visa or
MasterCard
logos, but cannot be used as "debit cards", only as "credit
cards"", and they are not accepted by all merchants that accept
debit and credit cards, but only by those that accept
FSA debit cards. Merchant codes and product
codes are used at the point of sale (required by law by certain
merchants by certain dates in the USA) to restrict sales if they do
not qualify. Because of the extra checking and documenting that
goes on, later, the statement can be used to substantiate these
purchases for tax deductions. In the occasional instance that a
qualifying purchase is rejected, another form of payment must be
used (a check or payment from another account and a claim for
reimbursement later). In the more likely case that non-qualifying
items are accepted, the consumer is technically still responsible,
and the discrepancy could be revealed during an audit.A small but
growing segment of the debit card business in the U.S. involves
access to tax-favored spending accounts such as
flexible spending accounts (FSA),
health reimbursement
accounts (HRA), and
health
savings accounts (HSA). Most of these debit cards are for
medical expenses, though a few are also issued for dependent care
and transportation expenses.
Traditionally, FSAs (the oldest of these accounts) were accessed
only through claims for reimbursement after incurring, and often
paying, an out-of-pocket expense; this often happens after the
funds have already been deducted from the employee's paycheck.
(FSAs are usually funded by payroll deduction.) The only method
permitted by the
Internal
Revenue Service (IRS) to avoid this "double-dipping" for
medical FSAs and HRAs is through accurate and auditable reporting
on the tax return. Statements on the debit card that say "for
medical uses only" are invalid for several reasons: (1) The
merchant and issuing banks have no way of quickly determining
whether the entire purchase qualifies for the customer's type of
tax benefit; (2) the customer also has no quick way of knowing;
often has mixed purchases by necessity or convenience; and can
easily make mistakes; (3) extra contractual clauses between the
customer and issuing bank would cross-over into the payment
processing standards, creating additional confusion (for example if
a customer was penalized for accidentally purchasing a
non-qualifying item, it would undercut the potential savings
advantages of the account). Therefore, using the card exclusively
for qualifying purchases may be convenient for the customer, but it
has nothing to do with how the card can actually be used. If the
bank rejects a transaction, for instance, because it is not at a
recognized drug store, then it would be causing harm and confusion
to the cardholder. In the United States, not all medical service or
supply stores are capable of providing the correct information so
an FSA debit card issuer can honor every transaction-if rejected or
documentation is not deemed enough to satisfy regulations,
cardholders may have to send in forms manually.
See also
References
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