A consumer can finalize a debit transaction at the point-of-sale in one of two ways: secure it by keying in a PIN or authorize it by signing a receipt. The major differences between these two are:    How they are handled by the retailer and the customer at the point-of-sale; and    How they are processed behind the scenes. Every ATM/debit card can be used for a PIN-secured transaction, but cards with a MasterCard or Visa logo on the front can also be used for a signature-authorized transaction. Whether secured with a PIN or authorized with a signature, the funds are debited from the associated checking account. PIN-secured Debit Transactions At the point-of-sale: As the name implies, PIN-secured transactions require customers to enter a secret PIN at a point-of-sale terminal, much as they do when using an ATM. Customers are not required to sign receipts to authorize PIN-secured transactions and they may have the option at some locations to receive cash back by specifying an amount larger than the amount of the purchase when they enter their PINs. Any ATM/debit card can be used for a PIN-secured debit transaction.

Processing: As with an ATM withdrawal, the transaction is routed through an electronic payments network, the funds for the purchase are immediately debited from the customer's checking account and the retailer's account generally receives the funds the following business day. Retailers are able to give customers cash back at a reduced risk, knowing that the transaction is designed to be approved only if funds are currently available and that the full amount of an approved transaction can be withdrawn immediately from the customer's account. Because the customer's account is debited at the time of the transaction, PIN-secured debit is sometimes referred to as "online debit."

Signature-authorized Debit Transactions

At the point-of-sale: Signature-authorized debit transactions do not require customers to enter a secret PIN. Instead - as with credit card transactions - customers sign a receipt authorizing their financial institution to debit the transaction amount from their account and retailers are expected to compare the signature on the receipt with the signature on the back of the ATM/debit card. A purchaser cannot get cash back from a signature-authorized debit transaction and this type of transaction can be made with an ATM/debit card bearing a MasterCard or Visa logo on the front.

Processing:

With a signature-authorized transaction, funds are not debited from the customer's financial account until an average of two business days after the purchase is made and the retailer's account generally receives the funds one business day after that, or an average of three business days after the purchase is made. This delay - and the fact that there is no guarantee that the funds will be available when the transaction goes through - means that retailers are unable to give customers cash back. Because of the delay in debiting the customer's account, signature-authorized debit is sometimes referred to as "offline debit."

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