What Is a Signature-Based Debit Card?

Debit cards are used to compensate retailers by authorizing the retailer to withdraw money from the card holder's checking account. A traditional debit card allows an individual to facilitate this transaction by entering in the personal identification number associated with this card when he is making his purchase. However, some cards -- sometimes referred to as signature-based debit cards -- do not require the card holder to enter a number. Instead, he will sign his name.

Check Cards

Signature-based debit cards are also sometimes referred to as check cards. A check card is marked with the logo of a credit card company. Whereas traditional debit cards are only accepted by retailers who are equipped with a machine allowing the customer to enter his personal identification number, signature-based debit cards are accepted by all retailers who accept credit cards. The money will, however, still be drawn from the card holder's checking account.

Misconceptions

Although the process of using a signature-based debit card resembles that of using a credit card -- the card holder will swipe his card and then sign a payment slip -- a debit card draws money from a different place. Whereas when a person uses a credit card he is drawing money against a line of credit with a financial institution, the use of a signature-based debit card does not allow him to take out any kind of loan, only to withdraw money from a bank account.

Verification

Both personal identification numbers and signatures are a means by which retailers can verify that the person using the card is indeed authorized to do so. Theoretically, only the person authorized to use the card should know the personal identification required to do so. Similarly, a retailer receives a signature on a signature-based debit card as a means of ensuring that it matches the signature that appears on the back of the debit card.

Considerations

When a person uses a signature-based debit card, he will generally be asked whether he wants to process the transaction as "debit" -- meaning by entering his number -- or "credit" -- meaning he will sign a receipt. If he chooses to process the transaction as credit, the transaction will be routed through a credit card company rather than directly through the person's bank. This may lead to a delay of several days in the money being withdrawn from the card holder's checking account.