Cheque and debit cards: what’s the difference?
If you have a savings, transaction or current account at a bank, you are issued with a debit or cheque card, and you may even have both a cheque card and a debit card linked to the same account. What are the differences between these two types of bank card, and is it necessary to have both in your wallet, which is probably already bulging with plastic?
Before the introduction some years ago of chip-enabled “smart” cards, there were two distinct types of bank card that debited money directly from your account (as against the credit card, which is not under discussion here):
• ATM cards, issued under either the Maestro or Electron brands, which could be used as debit cards at certain, but not all, retail outlets. These cards required a PIN for use at ATMs or point-of-sale transactions.
• Cheque cards, which looked and operated like credit cards, displaying the MasterCard or Visa logo, except they were linked to your cheque account instead of a separate credit-card account, and could not be used for buying on credit. Like credit cards, they didn’t need a PIN. They could be used for online purchases, offered free, basic travel insurance, and could be used internationally.
Times changed. There was a tightening of access to credit, making credit cards harder to obtain, while cheque cards grew in popularity. As card technology became more sophisticated, there was a convergence of functionality between debit cards and cheque cards.
The costs of transacting on these cards have also changed. Whereas you have never paid transaction charges on credit cards (the merchant pays the transaction costs), you have been charged for debit- and cheque-card transactions. However, the banks have generally eased up on these charges, especially on value-bundle accounts.
So we are left with two types of card that serve essentially the same function.
Recognising this, one of the so-called “big four” banks, Absa, has discontinued its cheque card. Newcomer bank Capitec, on the other hand, has only had one type of card for its Global One account-holders.
What you can do with your card and whether you are issued with a debit card or a cheque card depends on your bank and your type of account.
For two of the banks that issue both types of card, one of the main limitations of their debit cards is that they cannot be used for all online transactions.
Note that if you still have the old type of debit/ATM card, with only a magnetic strip, you are not only far more restricted in what you can do with it, but you are also more vulnerable to fraud.
Willie van Zyl, the head of card issuing at Absa, says the bank has phased out cheque cards. Its chip-enabled debit cards have all the functionality of cheque cards, including (since 2015) being enabled for all types of online transactions.
Costs: On cheque accounts, if you have a value-bundle option, you do not pay any transaction fees when swiping your card, Van Zyl says. Pay-as-you-use transaction fees differ by pro-duct type. For example, the entry-level Transact account has no fees for point-of-sale purchases, the Flexisave account charges R2.65 per transaction, and current accounts normally charge R3.85 per transaction.
Customers who open an account do not pay a fee to be issued with a debit card, but there is a card replacement fee of R100.
Capitec’s MasterCard debit card on its Global One account is enabled for online transactions (if you request such functionality to be “turned on”) and you can use it when travelling overseas. The card does not, however, offer travel insurance.
Costs: There are no fees for point-of-sale transactions. You pay R53 for a replacement or supplementary card.
First National Bank (FNB)
Ryan Prozesky, the chief executive of value banking solutions at FNB, says historically the bank issued Electron cards as debit cards, which required a PIN. Cheque cards, issued mainly to cheque account-holders, required a signature to authenticate transactions. Since the migration to chip-enabled cards, he says, both cheque cards and debit cards require a PIN.
Prozesky says technically there is no difference between FNB’s cheque and debit cards. Both can be used for point-of-sale purchases, secure online shopping, cash withdrawals and international transactions. Transactions are authorised and cleared against the account from one to seven days later.
You can have an FNB Gold cheque/debit card issued in the branch immediately, without your name embossed on the card, or a personalised card can be delivered within five days.
Costs: Purchases with the card do not incur transaction fees. New and re-issued Gold cards (when a card expires) are free of charge, but a fee of R130 is levied if a card is replaced before the expiry date, Prozesky says.
Nedbank still has two types of card, and the differences are more marked. Rakesh Ranchod, the head of Nedbank card customer management, says the bank now issues only Visa and MasterCard chip-enabled cheque and debit cards.
The two types of card have the same functionality except in the following respects:
• Only the cheque card can be used to accumulate Greenbacks;
• Only the cheque card offers free basic travel insurance;
• Internet usage on the debit card is limited to 3D-secure merchants; and
• The debit card cannot be used for toll-gate payments.
Costs: Ranchod says the cost of the card and the cost of the transactions depend on the type of current or savings account to which the card is linked. (Visit www.nedbank.co.za for the fees on all Nedbank’s accounts.)
Standard Bank also has both types of cards, now chip-enabled Visa or MasterCard cards, with some differences in functionality.
Richard Fraser, the senior manager of banking products at Standard Bank, says the bank’s debit cards can be used for point-of-sale purchases, cash withdrawals at a till-point and online transactions with merchants where Masterpass is accepted.
Cheque cards, which are personalised, can be used for online purchases at any merchant, as well as for toll-gate payments, which cannot be made using the debit card. In addition, cheque card-holders have access to travel, accident and medical insurance, and emergency services.
He says that if you have a cheque card, you do not also need a debit card.
Costs: Fraser says the transaction and card fees on its debit and cheque cards depend on the type of current or savings accounts to which they are linked. This information is available at www.standardbank.co.za.
Richard Fraser, the senior manager of banking products at Standard Bank, says Standard Bank’s debit card purchases are processed immediately, because all transactions essentially happen online. Cheque card transactions, on the other hand, are initially shown as “Outstanding card authorisation” on your provisional statement. When the merchant “banks” the transaction, Fraser says, the purchases are debited to your account. In some instances the “authorisation” amount differs from the final amount as the merchant may add on extras (for example, hotels and car-rental companies).
The transaction process for cheque cards and debit cards that can be used online happens in two phases in what is known as a dual messaging system, Willie van Zyl, head of card issuing at Absa, says. These are:
• The authorisation phase, where the transaction “message” is sent to the cardholder’s bank (issuer) to confirm that the card and PIN combination are valid and to check if there are sufficient funds in the linked account for the transaction in question where, upon approval, these funds are the “reserved”. This happens instantaneously.
• The settlement phase refers to where the merchant bank requests final settlement from the issuing bank which also involves contractual agreements between the respective acquiring bank and the merchant. In accordance with National Payments Systems settlement & charge-back regulations, Van Zyl says, the merchant via his acquiring bank has up to 120 days to present a settlement request to the issuing bank.