Decoupled debit card

What is a decoupled debit card?

A decoupled debit card is one that can be linked to any checking or savings account. This means that when cardholders make a purchase, the card issuer pays the retailer, and then charges the cardholder’s bank account with an automated clearing house (ACH) transaction.

Deeper definition

Traditionally, a debit card was issued by a bank and linked to the customer’s checking or savings account at that bank. When the customer makes a payment using her debit card, the merchant sends the request to the bank, where her balance is verified and the funds meant for the purchase are debited from the account.

Unlike a regular debit card, a decoupled debit card is not linked specifically to any financial institution. When payments are made using a decoupled debit card, the transaction goes instead from the merchant to the processing network, such as MasterCard or Visa. The issuer of the decoupled debit card authorizes the transaction and uses an ACH for the transaction so that the merchant receives the payment.

Merchants benefit from accepting payments from decoupled debit cards due to the lower processing and transaction costs as well as from co-branding and loyalty-building opportunities. However, because decoupled debit cards don’t offer significantly different incentives than conventional debit cards, the vast majority of consumers have little reason to choose decoupled debit cards over those issued by their banks.

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Decoupled debit card example

Capital One was one of the first financial institutions to offer a decoupled debit card. Their version was a MasterCard co-branded with a convenience store based in Richmond, Virginia. The decoupled debit card let users make purchases that charged their bank accounts via ACH, but after a year the introductory program was canceled.

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