If It Looks and Acts Like an ATM Card, It's Likely a Debit Card

THE day Americans don't leave home without a debit card is closer than many may realize.

When a consumer makes a purchase with a debit card, the purchase price is deducted that moment (or at least that day) from the consumer's bank account in an electronic transaction. No money in the account means no sale.

If you're wondering what a debit card looks like, take out your wallet. There's probably one inside. It's your ATM card, which provides access to automated teller machines. Some 209 million Americans have ATM cards, says Lauri Giesen, editor of Bank Network News in Chicago.

An ATM card functions as a debit card only for withdrawing cash from a bank account. In some locations, it can be used for purchases, but it would require that merchants put in terminals at the point of sale, Ms. Giesen says. Usage could become more widespread because most of the credit-card and check-approval terminals sold to stores in the last five years are compatible with debit cards, Giesen says.

The terminals can be connected to a PIN pad, the keypad on which a consumer enters his personal identification number. A PIN pad costs about $100.

Cost versus savings

The question for merchants is whether the cost will be offset by savings. ``People are running that calculation every day of the week,'' says Doug Miraglia, vice president of national sales and business development for debit products at MasterCard International in New York.

Some supermarkets have found that the cost was justified by the reduction in bad checks received, Giesen says. Transactions also take less of a cashier's time than verifying a check. And the stores get their money faster.

Already, all Exxon and Mobil filling stations accept debit cards. So do most supermarkets. Other retailers are conducting pilot programs: Toys ``R'' Us in California; True Value Hardware and Burger King in Kansas City, Mo.; Target in California and Wisconsin; and Walgreen's in New Mexico, Giesen says.

Mr. Miraglia says 27,000 retail locations in the United States accept an ATM card with MasterCard's Maestro logo as debit cards. Maestro is a national and international network for processing debit transactions.

The number of Maestro locations is tiny compared with the 3 million that accept MasterCard. However, Maestro is only two years old, whereas MasterCard has been around for 26 years. Miraglia says he expects the 3 million locations to accept the Maestro debit card eventually. Meanwhile, 581 US banks have issued 8 million Maestro cards and are committed to issuing another 10 million.

Poised for takeoff

Edward Furash, a consultant to financial institutions, says that after seven years of existence, debit-card transactions are poised to take off the way ATMs did after 11 years. ``We're about to see rapid deployment of shared terminals,'' he says.

Mr. Furash says consumer acceptance has grown as banks have publicized debit cards as a ``plastic check.''

``Despite what everybody thinks, most consumers are not particularly concerned with float,'' Furash says. Float is the amount of time the money spent by check remains in the spender's bank account drawing interest. It is also the amount of time a consumer has to put enough money in an account to cover that check. On average, a check takes just over two days to clear.

Furash says consumers who do not want the float period shortened ``live hand-to-mouth. They won't dictate what happens in the banking industry.''

Both Furash and Miraglia stress that debit cards will compete with cash and check-writing, not with credit cards. Seventy percent of consumer payments are made with cash or checks, Miraglia says. He adds that $20 to $100 is the range of expenditure that warrants use of a debit card. For purchases above $100, consumers will likely use a credit card. ``People don't buy a large-screen TV with a debit card,'' he says.

Fees for debit-card use vary from institution to institution. Some institutions charge nothing; others charge 10 cents to 25 cents. ``A consumer really has to ask his bank,'' Giesen says.