A debit card is a type of payment card — a small plastic card embedded with payment technology. It enables authorized consumers to buy goods or services without cash. Debit cards are provided by financial institutions (called issuing banks) on behalf of card networks (Visa, Mastercard, etc.).
A debit card is connected to a bank account. When a purchase is made with a debit card, funds are withdrawn from the cardholder’s account and paid to the merchant. Usually, if the account doesn’t have enough funds to cover the purchase amount, the transaction will be declined by the issuing bank.
NOTE
Both debit and credit cards enable cardholders to make purchases without relying on cash. However, the way transactions are funded differs slightly. A debit cardholder basically moves funds from their bank account to a business’s bank account without actually handing over the cash. Credit cardholders, on the other hand, borrow money from the issuing bank and give it to the merchant, later repaying the bank what is owed.
Because debit cards eliminate the need to physically present cash, they are commonly used for online payments.
If your business wants to accept payment cards — including debit cards — as a form of payment, you will need to apply for a merchant account. AltoPay can help online businesses obtain a merchant account in North America, Latin America, or Europe.
For more than a decade, Jessica Velasco has been a thought leader in the payments industry. She aims to provide readers with valuable, easy-to-understand resources.
