Card Services

ATM Cards

An ATM card is a PIN-enabled card. This means that a PIN is needed for all transactions. Typically an ATM transaction involves withdrawing cash from an ATM machine. The member presents an ATM card issued by the financial institution holding his or her checking account at an ATM terminal. The member enters the PIN to verify identity, the checking account is checked for adequate funds, and if everything is satisfactory, cash is issued. All of this is routed across one or more ATM networks.

All ATM cards are connected to an ATM network. The network logos are displayed on the card. The logos on the card indicate what network the card issuer participates in. Transactions can be made at any ATM that carries the same logos as the card. Examples of ATM networks include STAR, LINK, Cirrus, PULSE, PLUS, Interswitch, and Interac.

ATM cards may also be used to make purchases, if the merchant participates in one of the electronic ATM networks that are listed on the back of the card. This is called a PIN-based purchase, because the PIN must still be used to complete the transaction. PIN-based purchases can be made at merchants that display the same logos.

The common attribute of all ATM and debit card transactions is that the transaction is directly linked to the member’s account. However, for an ATM card, the PIN is always necessary for the transaction. If an ATM card is lost or stolen, no one can use it unless they know the PIN (unlike debit and credit cards that allow signatures).

Debit Cards

A debit card transaction involves the purchase of a good or service. For a debit card transaction, a member would present the debit card (which again is issued by the financial institution holding the checking account) to a merchant. Using one or more debit card networks, the merchant sends the information about the transaction and, if the transaction is approved, the checking account is debited and the member receives the good or service. However, unlike an ATM card, the member either enters a PIN or signs a receipt to verify the consumer’s identity.

Credit Cards

A credit card is a plastic card issued by a financial institution, business, etc., allowing the cardholder to purchase goods or services on credit. The card issuer manages the account and grants a line of credit to the cardholder. The account is a revolving line of credit subject to interest charges.

All credit cards have at the very least a magnetic stripe which holds static data. However, mag-stripe cards are easily cloned. The card authentication is based on static data. Cloned cards are considered authentic because they carry the same data as real cards. Mag-stripe was the standard in the United States until 2015.

EMV® is a global standard for credit and debit payment cards based on chip card technology. It takes its name from the original card schemes that developed it – Europay, MasterCard, and Visa. The standard covers the processing of credit and debit card payments using a card that contains an embedded microprocessor "chip" which uses dynamic data. The microprocessor allows the card and the point-of-sale terminal to do the following:

  • Exchange data
  • Perform offline risk management

  • Generate an authorization request that contains:

    • Transaction parameters (such as the amount, type of currency)
    • Offline risk management results, authentication, and PIN verification
    • An Authorization Request Cryptogram that authenticates the card and the transaction

EMV does not address "card not present" fraud. Credit unions should consider CNP fraud mitigation measures such as:

  • Implementing prevention and detection programs that involve the member such as cardholder controls over notification
  • Requiring transactions to go through an extra authentication step, and
  • Implementing tokenization to remove the card number from the transaction

As of October 1, 2015, the fraud liability shifted to whichever party is the least EMV compliant. If the merchant did not upgrade its POS terminals and software, it is liable for any card fraud where the issuer has distributed EMV cards. There is no mandate for the card issuer to provide EMV-enabled cards. The shift in liability compels the merchant to update its POS terminals and software to EMV-enabled.

Prepaid Cards

There are several types of prepaid cards, including gift, payroll, and student cards. Unlike a credit card, a prepaid card is funded ahead of time and does not use a line of credit. With a prepaid card, the consumer, or an issuer such as the credit union, funds the account for the card. When a consumer uses the card to make a purchase, the merchant deducts the amount of the purchase from the card.

There are two main types of prepaid cards, "open-loop" and "closed-loop" cards. An open-loop prepaid card is associated with a certain electronic payment network (such as Visa, MasterCard, American Express, or Discover). As long as there are sufficient funds on the card, it can be used at any retailer that accepts cards from that network, or at an ATM unless otherwise restricted. However, a closed-loop prepaid card is merchant specific and can only be used when shopping at that merchant’s retail location.

The terms prepaid cards and stored-value cards are frequently used interchangeably but there are differences between the two product offerings. Prepaid cards are generally issued to persons who deposit funds into an account of the issuer; stored-value cards do not typically involve a deposit of funds as the value is prepaid and stored directly on the cards.

Transaction authorization can take place through an existing card network, a chip stored on the card, or information coded on the magnetic stripe. Generally, it is not possible to spend more than what has been preloaded on the card. Once the stored value in the card is exhausted, customers may either replenish the value or acquire a new card.

Last updated February 7, 2017