Why do VISA "Electron" and Master Card "Maestro" cards have special limitations in when they technically work?

Question

Translated by me to English from Swedish, from VikingLine.se:

We welcome payments onboard with the following cards:

American Express, Diners Club, Eurocard, Finnish bank cards, Master Card, VISA.

VISA Electron and Maestro cards are accepted onboard, with the reservation that there might be temporary outages in the satellite communication. With such communication outages, these cards unfortunately cannot be accepted.

My question is simple: what makes these "Electron" and "Maestro" versions of VISA/MasterCard pay cards "special" in a technical sense, causing them to not be able to be used when "satellite communications" are temporarily disturbed, even though the "real" VISA and "real" MasterCard cards can be used even in those cases?

Answer 1

Other Visa or Mastercards are either credit cards, or debit cards associated with a bank account with an overdraft facility. There is a high probability that a transaction will be honoured even if there is no bank connectivity at the time of the transaction.

Electron and Maestro cards have no overdraft facility behind them. They could be prepaid cards, or cards linked to bank accounts with no overdraft or other means to reclaim money from the customer. As a result, the merchant is unlikely to take one in payment unless they can contact the bank to authorize the payment.

Answer 2

When you use a card, there are usually two phases in the transaction:

• Authorisation, where you (the merchant) ask if you can charge amount X on the card, and the issuer will tell you yes or no, and if yes, you are more or less guaranteed that you will get that amount once you charge it (with all sorts of caveats). Note that you can later charge a lower amount (e.g. if some of the items ordered were not available, or when pumping gas) and sometimes a slightly larger amount (e.g. tips in restaurants). The issuer will also deliver an authorisation code at this stage.

  Authorisation is done electronically, at the time of the purchase, by contacting the issuer's systems. There used to be autorisations by phone, but I think those are gone.

  When in a "card present" situation (in a brick-and-mortar store) with a chip card, it actually involves a dialogue between the chip in the card and the issuer's server, through the terminal, the merchant's processor, and the card network (authorisation does not just check there's money, but also that the card is really the card it says it is).

  In "card not present" situations but on the Internet, authorisation now very often requires 3D Secure (aka Verified by Visa, Mastercard SecureCode, etc.), with use of a secondary password, pin, OTP sent by phone, validation through an app, etc.

  In "card not present" situations without Internet (on the phone, by mail...) there are less verifications, but merchants often pay more to account for the higher fraud risk.

• The actual charge, which usually comes with the authorisation code, but not always. If you make a charge without an authorisation code, then you are not guaranteed you will get the money, as the card may be maxed out, cancelled, or a number of other reasons.

  Charges were traditionally done via the imprint (a carbon-copy document was applied to the embossed numbers on the card), but they are now done entirely electronically. The difference with authorisation is that this can (and actually generally does) happen at a later time (e.g. in a batch overnight) rather than immediately at time of purchase. You don't need to have the card or the user at hand at the time you submit the charge.

Most cards allow a charge without authorisation. Visa Electron and Maestro cards do not.

The idea behind those cards is that you cannot spend money you don't have (and sometimes additional limits like max amount per day/week/month), so you can't go into overdraft, or use actual "credit" features. For this to work, every single transaction needs to be authorised beforehand. Without authorisation, the charge will be refused. Electronic terminals will simply refuse to charge the card.

Note that in some cases, chip cards can actually say "it's OK to charge up to amount X without authorisation". This is what allows quicker transactions without authorisation (which was very useful back in the days of dial-up connections), especially for contactless nowadays. Visa Electron and Maestro cards will always set this maximum to 0.

So most credit cards can be used in situations without access to the card network. Visa Electron and Maestro cards cannot.

The situation for debit cards is complex and varies a lot from country to country and bank to bank, and sometimes between account types. Some banks will issue only Visa Electron/Maestro type cards which won't let you spend money you don't have. Others will issue regular cards which can be used without authorisation and could lead to an overdraft, exactly like it can happen (or used to happen, in some places) with checks.

Answer 3

This is the electronic/online use only (Maestro, VISA Electron) card vs. traditional (offline transactions allowed) difference.

With traditional cards one can get an imprint and claim the transaction using this imprint later. They are also called embossed cards because the letters and numbers are embossed to allow this imprinting. One can also use the number to reserve a hotel over the telephone or pay over the telephone and similar. It is also possible to store the transaction request in the terminal and process it later when the connection is available, as explained in other answers (I did not really want to discuss the technical details, but the difference in the card types - transaction can or cannot be delayed). This is impossible with cards that only allow online use. Their transactions needs to be directly validated with the bank at the time of the transaction.

Please note:

No, this is not about credit vs. debit. Debit cards are very commonly of the traditional type. All my cards are now like that. I used to have an electronic credit card - the online transactions checks whether you have already exceeded your allowed debt limit or not. But it is much more common for credit cards to be traditional, I reckon in USA that might be the only option.

This is also not about the overdraft possibility. Or at least not about the overdraft negotiated with the bank for routine use. However, the electronic use will indeed stop you from going into an overdraft if your bank has strong limits and stops the online transaction into the negative balance. One can easily have a negotiated ovedraft on an account with an electronic debit card. But one cannot have money taken from the account ex-post as car hires often do for damages (they most often require a credit card for this reason, although techically other possibilities would exist).

One can also get into a non-negotiated (not-allowed) overdraft by other means, without using the card - e.g. by having car insurance subtracted while having no money. That is the property of the account, not of the card. And the bank will charge a lot for going into this.

Answer 4

This is a fundamental difference between debit and credit cards.

Credit cards are designed for offline transactions, long before "online" became a thing. They were used only for offline transactions for decades, before the cheap-ish phone lines and modems became commonplace.

It was up to the card holder not to exceed its credit limit (and even today there is some fine print in the contract about exceeding your credit limit - a thing one cannot even try in an online transaction).

In a lot of cases, the merchant usually doesn't get their money right away, they more or less wait until the cardholder pays up. It is the merchant (or their bank) giving you a credit, not the card operator or your bank. The card just certifies that you are (somewhat) credit-worthy.

Since the beginning of 2000s, one rarely needs to make an offline transaction because most things are online anyway. But the possibility and the protocols do exist and can be used.

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Debit cards are a completely different can of beer. They are a cash replacement and designed to work online from the start.

They do look similar to the credit cards and work in the same devices, but they work in completely different manner.

Each transaction (even small ones) is checked against your bank account and this is impossible offline. The money are transferred right away.

(This is, by the way, why one can generally deny a credit card transaction and it is up to the merchant to prove that you actually ordered the payment. With the debit card, you pay just like paying cash and it is up to you to prove the transaction is fraudulent. Transaction fee burden differs, too - credit card transactions are paid by the merchant, debit card transactions are paid by the cardholder.)

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In today's marketing-dominated world, banks and card issuers make it somewhat hard to distinguish between different product names (e.g. some "debit card with overdraft allowed" are in fact credit cards, others are debit cards and even ordinary bank clerks cannot always tell the difference).