What Your Members Need to Know About Decoupled Debit Cards

As decoupled debit cards become more popular, your members will likely have questions. What do you need to know to respond to their questions?


The payment systems market is expanding on all fronts, through online p2p payments, mobile payments, and advances in the card market. On top of new security measures and customizable images on cards, perhaps the issue that concerns most credit unions is the increased presence of decoupled debit cards. Decoupled debit cards are cards issued by a third party, but they are tied to an account at a financial institution. In the past, a debit card was an automatic addition to a credit union checking account, but this may no longer be the case. With the adoption of decoupled debit cards, credit unions would be losing an important component of their interchange income. Additionally, by adding another institution to the mix, credit unions may see member relationships slip as this new institution has the ability to cross-sell other financial products.

The most prominent example of decoupled debit cards is Capital One's offering. However, PayPal has recently announced plans for a debit card that provides access to the funds in an individual's PayPal account. This card is also tied to a traditional bank account as a backup if the balances in the PayPal account were to decline to zero. In these instances, the card would effectively operate as a decoupled debit card. Understanding the fundamental issues of decoupled debit cards will not only help a credit union respond to questions from members, but will also help the credit union position itself to remain competitive.

Responding to Capital One's Offering

The key feature of Capital One's debit card is the rewards program. The rewards program is used to position the card as a superior alternative to the standard debit card. While one obvious option for credit unions is to fight fire with fire by either starting or expanding their own debit rewards program, there are other components of the program that credit unions can use to show their members the value of maintaining a credit union debit card.

A key item for members to understand is that they may be a facing a more restrictive spending limit. According to Capital One's website, total purchases on the card cannot exceed $500 within a day or $1,200 within a 10-day period. While the average debit card transaction is well below this daily limit, members who use their card multiple times throughout the day, or those using their debit card for large purchases, should be aware of the restricted access to their funds.

Another component that members might be interested in is the combination of credit and debit rewards. If a member has a Capital One credit card, they may see value in adding the debit card as well. However, the rewards structure offered through Capital One's debit card cannot be combined with the rewards they earn through their credit card. Thus a member that has a Capital One credit card would receive no higher benefits than other members. Additionally, only debit transactions that are signature based are eligible for rewards; PIN-based transactions do not apply.

Debit cards are a key component of credit union member relationships. Allowing a third party to develop a debit card relationship with your members increases the possibility that they will be cross-sold into other financial products. Having a detailed understanding of the benefits and drawbacks of the competition will help credit unions develop options to position themselves in the best way possible as competition in the debit card market heats up.




Dec. 29, 2008


  • Another key advantage some credit unions have over a decoupled card is the ability to avoid nuissance fees such as surcharges at ATMs. CUs in surcharge-free networks should tout those memberships now more than ever and let members know of the additional costs they will be encountering.
  • Another key item credit unions should share with their members is the competitive advantage the credit unions have in managing the fraud risk with the protection tools in place. (ie: Fraud Management System to alert the cu to suspect fraud on their member.) If the member has accounts at various FI''s, it will be hard to manage the cross channel fraud at a account transaction level.
  • Very timely. I had never even heard of "decoupled" cards.
  • Very informative.
  • The PayPal MasterCard-branded debit card is nothing new. In fact, my wife has been carrying one for a couple of years and it effectively pulls from the funding account (either a checking or credit card account) whenever the purchase exceeds the PayPal balance.