Online Debit Cards : The Facts To Know

By: EconomyWatch Content Team   Date: 29 January 2010

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While in some circumstances the term online debit cards is used interchangeably with virtual debit cards, in the financial world this is not what an online debit card refers to. It is referring to a kind of transaction that a debit card is used for, and in certain circumstances it can be vital that consumers know the difference.

Online debit cards are just like any other debit card and can be used for both online transactions and all other transactions with no problem. Using the card for an online purchase will still instantly take the amount from your bank account and ensure the fastest method of processing transactions. An online debit card can be any debit card that uses a PIN number to verify the transaction. The use of the PIN number is what designates the transaction as an online debit card transaction. This verification makes sure that the transaction is processed through the debit card network and not the credit card network. 

In the financial world at large using online debit cards are considered to be the superior type of transactions. Because of this general preference toward transactions that require the PIN number authentication several countries have started issuing debit cards that cannot be used without use of this PIN number.

So, if you live in or are planning to visit Canada or Brazil, be aware that you will not be able to use your debit card like a credit card and simply swipe it, you will have to provide your PIN number every time. While those are the only two countries requiring online debit card use, others like the United States and the United Kingdom are starting to show preference among merchants for online debit card transactions.

More merchants are recognizing that using online debit cards for their transactions are greatly reducing the risk that they will experience fraudulent purchases at their location. PIN numbers are generally a very secure method of initiating transactions both for merchants and customers. When the number is entered on the keypad only the customer knows that number, the keypad then encrypts the number so that in the event of a breach in security that number cannot be compromised.

Once the receiving bank verifies the PIN number, the merchant receives their funds. This is opposed to a signature verification that is used for non-online debit card purchases, like credit cards. Signatures can more easily be mimicked and for some purchases the signature verification may not even be required, which leaves consumers more open to being scammed if their information becomes compromised. The online debit card process makes fraud much less likely and is a benefit to the financial world as a whole.


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