During mass network outages, how come credit works but not debit?


If you’re Canadian, you’re probably experiencing a network outage right now.

In: 33

Because it’s a different network. No money actually moves when you do a credit transaction. You tell the credit company to give money on your behalf. It’s done just over the internet and can be queaed up and released. Card transactions get verified and money “moves” immediately.

So they’re different networks and if the core goes down the whole thing breaks.

Credit card can work offline, they just record your credit card number, the amount, and your signature to approve the transaction. In old days, they did that by pressing carbon-copy paper over your credit card.

Later, they will take this transaction info to the bank, and I think credit company might pay the seller even if your credit card is over balance (they will charge you the overdraft fees). So no risk for the seller.

With debit cards, they need confirmation from the bank that there is enough money in your account. I am pretty sure that without explicit overdraft protection service, a bank will reject debit transaction.

Credit transactions can be queued and processed at a later time in batches. Real-time authorization methods like the chip require communicating with the credit processor right then, but something like a card swipe does not. Of course the vendor doesn’t actually get to know if you have available credit right then and the credit company won’t know about the transaction until the batch is processed, but the sale is generally worth the risk.

Best practice is to process credit batches every day but some establishments have been known to take a week or more to settle pending transactions, which customers might get peeved about since the transaction will suddenly pop up well after the event.

Debt transfers though are direct withdrawals from a bank account. Immediate communication is required to know there is money in the account and to move it, queuing them up isn’t possible.

As an aside, debit cards are way riskier than credit and you are a madman if you use them regularly.

Back when credit cards were invented there was no network. The shop owner would have to write down your number and get a signature, then send it to the bank and the bank would pay the shop owner and update your account. They still do something like this, if they can’t get in touch with the bank in real-time.

With a debit card, getting in touch with the bank in real-time is mandatory since the money comes out of your account immediately. That’s, like, the entire difference between a credit card and a debit card.

The simple answer is different transaction approvals flow through different paths.

When you use a debit card the processor has to ask your bank if it’s okay. When you use a credit card the processor can either ask the credit card company if it’s okay, or if they aren’t available go through a series of protocols to determine if it’s okay.

As a side note you should almost always use a credit card for transactions, the federal protections for credit card users are far superior to debit card users. For instance if you have fraudulent charges in a credit card the companies have to remove it immediately and run a chargeback to the store. Your bank can take days to weeks to determine if they are going to give you your money back.