Debit Card Transaction , How It Works

As a consumer, most people can pick up their debit card and know exactly how a debit card transaction made with it will be processed to their account. But apart from that the types of transactions and how they work from a technical standpoint. While this is not vital information to have in order to use your credit card, it can be helpful to understand how the process works in case a problem occurs.[br]

As a consumer, most people can pick up their debit card and know exactly how a debit card transaction made with it will be processed to their account. But apart from that the types of transactions and how they work from a technical standpoint. While this is not vital information to have in order to use your credit card, it can be helpful to understand how the process works in case a problem occurs.[br]

There are two classifications for a debit card transactions, online and offline. The most typical thought to jump to is that an online transaction would take place on the Internet and an offline transaction would be at a store. But that is an easy misunderstanding to make and is not correct. An online transaction is a transaction that takes place within the debit card computer system. This is anytime you are asked for your 4-digit PIN number when you make a purchase. You are probably often asked for your PIN number at many places when you use your debit card, and all of these are considered online transactions. The online specification means that your transaction is being routed through the debit card network with your PIN number.

An offline transaction is one that is processed like a credit card, without your PIN number. Because the PIN number is not provided, it is immediately routed the same way a normal credit card would be routed through the Visa or Mastercard network.[br]

Another important consideration is the fees a merchant must pay when processing credit card or debit card transactions. This is how a credit or debit card company makes a majority of their money. They charge a certain amount of money in order to process those transactions. Typically a debit card transaction is charged much less so merchants are usually more willing to accept debit cards than credit cards. And should you run across a merchant who is unwilling to process a debit card without the PIN number, this is likely why. In some cases it can cost a store up to 3 times more to process an offline payment than an online payment.

Once the transaction is made it is processed through either the online of offline network and routed to your bank account. It goes to the merchant’s bank account and they connect your debit card number to your account and collect their funds. This is a very quick process and is usually completed in about one to two business days. The end result of all this routing and processing is the debit that you see on your bank account statement. Of course, like anything that is electronic, mistakes can be made. Although you should always play it safe and assume that a strange debit from your card is fraud, just remember that it is always possible that it was just a routing mistake. These do not happen often, which is largely why debit cards are so popular with merchants and consumers alike.