Understanding the Importance of Debit Cards - By Avi Jorisch

People talk about Debit Cards more today than ever before. The move by our banking institutions to provide checking account customers with a check card branded by a Card Association, as well as backed by a debit network, has given consumers more flexibility in their payment options.

In 2010, US Congress issued the Durbin Amendment of the Dodd Frank Wall Street Reform and Consumer Act, which in theory gave merchants the ability to reduce the fees they pay for debit card acceptance, if they were processing on an interchange pass through plan. But many merchants are still on antiquated pricing plans, which do not allow them the ability to derive the benefits due to them.

There are two types of debit when talking about Debit Cards. They can both be represented on the same physical plastic card.

Online Debit

Online Debit is sometimes referred to as PIN debit. This is similar to performing a transaction at the ATM. The card is swiped or inserted and the consumer is asked to enter their secret Personal Identification Number (PIN). The transaction is processed over the banking ATM network and the transaction is approved or declined. As a Merchant, you must be specifically setup to accept these types of transactions through your Merchant Account, and you must have special hardware to accept the PIN entry from the customer.

Offline Debit

Offline Debit is sometimes referred to as Signature Debit. This is similar to a credit card transaction. If the card has a branded logo on the front, such as Visa or MasterCard, the card may be processed by simply swiping it through a credit card terminal that supports that card’s brand. The transaction is processed over the Merchant’s regular credit card network and the transaction will come back as either approved or declined. The customer must then provide their signature as approval of the transaction.

Merchants can reduce their processing and interchange fees by determining what level of debit card acceptance they have AND ensuring they are on interchange plus pricing. It would benefit greatly to check with their processor to optimize their level of fees.