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Debit Card on Internet

Debit Card is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer.

The buyers account is debited with the exact amount of purchases. An individual has to open an account with the issuing bank which gives debit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transactions. 

The customer can never overspend because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account.

Types of Debit Cards 

Two different types of debit cards are: 
1) Online Debit: Online debit cards use the same underlying technology as ATMS (bank machines) that dispense cash; authentication may consist of the use of a numeric PIN (personal identification number) known only to the cardholder. PINS can be used only where the POS (point of sale) terminal is properly equipped; in particular, a separate keypad is needed to allow the customer to enter his or her PIN and select the account from which funds should be drawn. This is the only method used in some countries, particularly Canada.
 
2) Offline Debit: Offline debit cards carry the logotypes of, and can be used in a manner nearly identical to, major credit cards (for example, Visa or MasterCard). The use of a debit card in this manner may have a daily limit, with the maximum limit being the amount of money on deposit. A debit card used in this marner is similar to a secured credit card.
 
Advantages of Debit Cards 

1) No Issues of Creditability: 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. 

2) No Racking of Debts: Use of a debit card is limited to the existing funds in the account to which it is linked, 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. 

3) Avoidance of Writing Cheques: 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 transrction 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. 

4) Less Identification: 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.

5) ATM Transactions: 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. 

Disadvantages of Debit Cards

1) Overlimit Fees: Some 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).  

2) Rejected Transactions: 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.

3) Possibility of Pin: In some unspecified 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 transaction PIN input and theft using a signature-based credit transaction is equally easy as theft using a signature- based debit transaction. 

4) Interest by Banks: 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.


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