Debit Card Payment Process 101: How It Works

Three way exist in today’s market for debit card payment processing: online debit (PIN debit), offline debit (signature debit) and the Electronic Purse Card System, which is primarily used in Europe and will not be discussed in this article. One physical card can include the functions of an online debit card, an offline debit card, and an electronic purse card, all three of which are related to the debit card payment process.

Online debit cards require electronic authorization during the debit card payment process, and the debits are displayed in the user’s account immediately. The debit card payment process may be secured with a personal identification number (PIN) authentication system; some online cards mandate this authentication for all transactions, fundamentally turning into enhanced ATM cards. An issue in using online debit cards is the need for an authorization device at the point of sale (POS) and often a separate PIN pad, although it’s common for all debit card payment processes across the globe. Many feel that the online debit card is superior to the offline debit card because of its secure authentication system and real-time processing, which bypasses processing lag on transactions that may only issue online debit cards.

Offline debit cards are used at the point of sale like a credit card, along with the customer’s signature. This type of debit card may be subject to a daily limit or a maximum limit equal to the current checking account balance from which the customer’s funds are withdrawn. Debit card payment processes involving offline debit cards require a couple business days to be seen in users’ accounts.

In a few different nations – and with occasional banks and merchant service organizations – a “credit” or offline debit transaction is processed without any charge to the consumer beyond the transaction itself, while a fee may be charged for a “debit” or online debit transaction, but this is just typically absorbed by the merchant. Online debit purchasers may also withdraw cash in addition to the amount of the debit purchase, if the merchant offers that service. Additionally, the merchant pays lower fees on online debit card payment processes, as compared to “credit” or offline debit card payment processes.