Debit cards are similar to credit cards, except that the funds are immediately withdrawn from the cardholder’s bank account. Credit card charges, on the other hand, are billed to the cardholder each month, and interest charges may be added. Also, a credit card holder need not pay the entire balance due each month, while with debit cards there is no balance to pay off, as the money comes directly out of the cardholder’s bank account.
There are two types of debit transactions; one is offline debit (Signature), and the other is online debit (PIN). With offline debit, the customer signs a receipt and does not enter a PIN and the transaction travels through the Visa/MasterCard Network. With online PIN debit, the customer must enter their PIN number and the transaction is authorized over a debit network. Online debit requires additional equipment (i.e., a PIN pad), and can only be used in a card present environment. Offline debit, however, can be used in both card-present and card-not-present situations (i.e., ecommerce websites) since no PIN is entered. All standard merchant accounts allow offline debit transactions to run through the account as if it was a standard credit card.