The most popular off-line debit card is the VISA Check Card followed by MasterCard's MasterMoney card. VISA says the number of off-line debit transactions has increased nearly 800% since 1991. Last year 46 million U.S. consumers racked up one billion VISA Check Card transactions, about 31 transactions per second. MasterCard has about 16 million MasterMoney cardholders.
What is an off-line debit card ?
Let's head up the learning curve.
Unlike VISA and MasterCard credit cards, debit cards are VISA and MasterCards linked to a bank account, usually a checking or savings account. There are two type of debit cards: on-line and off-line. On-line debit cards require PIN numbers and immediately debit the bank account it is linked to. Off-line debit cards do not require PIN numbers and generate an electronic check that is debited or settled against the bank account within the normal checking clearing timeframe, about one to three days.
Basically on-line or off-line debit cards are simply upgraded ATM cards. If your bank issued you an ATM card chances are you can now use it to purchase goods and services. Most local or regional ATM systems now provide what is called POS capabilities. POS stands for point-of-sale which means you can use the card to purchase goods and services at any participating merchant. Depending on where you live there are many brands or servicemarks of on-line cards. For example: NYCE, MOST, TYME, HONOR, MAC. VISA and MasterCard also have on-line cards under the Interlink and Maestro brand names respectively. As mentioned all these cards require PIN numbers.
However the most widely used off-line debit cards belong to VISA and MasterCard and carry the same VISA and MasterCard logo as credit cards. Such cards can be used at any of 13 million merchants worldwide. As a matter of fact the VISA Check Card and the MasterMoney card walk and talk like a credit card. While there is no apparent difference to the user it can be a little confusing. For example if you pull into a filling station with automated gas pumps you may be offered a number of payment options. To use a VISA Check Card or MasterMoney card you have to select the "credit" option instead of the "debit" option. Most systems see "debit" as PIN-driven debit only while "credit" is for both credit cards and off-line debit cards.
The purpose of off-line debit cards is to replace checks. Thus the name "check card". While less than 20% of
all U.S. consumer payments are made on credit cards. U.S. consumer still prefer checks and cash. Off-line debit cards
offer consumers the convenience of a credit card without the hassle of
p
roviding ID for each transaction and without the
hassle of paying interest on an outstanding balance.
Since off-line debit cards are essentially electronic check books that are regulated like checking accounts as opposed credit cards. Therefore cardholder rights are different. For example, a cardholder's liability for a lost or stolen off-line debit card can be as high as $500 compared to the maximum liability of $50 for credit cards.
Nevertheless consumers have embraced off-line debit cards like no others.
A study released this month by Atlanta-based Brittain Associates shows nearly 9.5 million U.S. households have replaced checks with VISA or MasterCard off-line debit cards at supermarkets alone. Brittain says almost 9 million households have replaced checks with debit cards at discount stores and nearly 7 million households have done the same at clothing stores. Brittain's study estimates U.S. annual sales volume attributable to off-line debit cards is approaching $95 billion.
While the popularity of off-line debit cards is unprecedented, merchants are not so thrilled. Major retailers, including Wal-Mart, allege the cost of accepting such card products has impacted profit margins compared to the lower- cost-per-transaction of personal checks or regional/local debit cards. Merchants pay about the same fee for accepting VISA and MasterCard off-line debit cards as they pay for credit cards which averages around 2% of the transaction. The merchant fees for accepting checks and on-line cards is a fraction of what merchants pay for VISA Check Card and MasterCard's MasterMoney card. Retailers have banded together to file a class action suit seeking to lower the merchant fees for off-line cards or the right to refuse to honor VISA and MasterCard off-line debit cards.
Other merchants have a different beef with VISA and MasterCard over such cards. Car rental companies believe there is a greater risk of loss with a customers guaranteeing payment with off-line debit cards. Most banks will issue VISA Check Cards or MasterMoney cards to any customer with a checking account in good standing. There is no credit qualification required. Car rental companies rely on credit cards as a way to screen out undesirable customers.
Consumer advocates also do not like off-line debit cards because of the float period between transaction and settlement. They believe this float can produce disastrous results for victims of stolen cards.
But the fact remains: consumers and banks love VISA Check Card and MasterMoney. The problem will be making merchants feel the same. Most likely we will see some major adjustments in the structure of merchant fees and perhaps some higher issuing standards.
For now though you should say "deb it" instead of "charge it".
