While credit cards and debit cards look similar, the key difference is where the funds originate:
Debit cards have evolved dramatically over the years – spurred by consumer demand and technological improvements. Below are three significant milestones throughout debit card history.
1966: The Bank of Delaware launches a debit card pilot program as an alternative to carrying cash or a checkbook. Adoption of this new debit card system is slow because there’s no technology connecting merchants to banks outside their state.1
1969: The first Automatic Teller Machine (ATM) in the U.S. makes its appearance at Chemical Bank in Rockville, New York. Consumers are able to withdraw cash using a form and a PIN number. Debit cards made the process more user-friendly in the 1970s.2
2017: Approximately 66 percent of American consumers say they prefer making debit card payments over credit cards because they give them more control over their finances by preventing overspending and interest charges.3
Like credit cards, most debit cards come with:
They are also programmed with Personal Identification Numbers (PINs) to protect customers, merchants, and banks from fraudulent debit card payments.
However, many newer types of debit cards come with additional fraud prevention technology to help keep users safe:
Payments made with debit cards are processed the same way as those made with credit cards. The only difference is that once the transaction is identified as a debit payment (either by the POS system or the customer), the cardholder is prompted to enter his or her PIN.
After authenticating the PIN, the payment is routed to a debit network, such as First Data’s STAR, Pulse, NYCE, or SHAZAM, which handles:
Some debit cards are also attached to a credit card network to enable signature debit transactions. These can be processed as either debit or credit:
Although there are differences between how credit and debit cards work, you don’t need to configure your payment environment for one or the other. If you currently accept credit card payments, you’re already set up for debit cards.
However, there are steps you can take to:
That’s where our PCI-compliant payment solutions can help. To learn more about our approach to secure credit and debit card processing, contact us today.
1 ”A Guide to the ATM and Debit Card Industry,” Federal Reserve Bank of Kansas City, 2003
2 ”The ATM at 50: It Was Invented before the Debit Card (and Other Weird Facts),” MarketWatch, 28 June 2017
3 ”Here are the only 3 times you should use a debit card,” CNBC, 17 October 2017