Electronic-use-only debit cards lack certain physical features that regular debit cards possess and therefore restrict where a cardholder can make transactions. According to MasterCard, electronic-use-only debit cards tend to serve underserved consumer segments and are often featured on some gift and prepaid debit cards. Additionally, electronic-use-only cards serve to protect cardholders from inaccurate billing, but pose drawbacks for certain merchants.
According to Chase Paymentech, the "Electronic Use Only" label tells merchants that your debit card is only equipped for use at electronic terminals, meaning you must swipe your card to obtain instant online authorization for every transaction. This label only appears on the front of unembossed debit cards, which are slightly different from regular embossed debit cards that aren't restricted only to electronic use.
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Unembossed Debit Cards
Unembossed debit cards are similar to embossed debit cards. The main difference is that the information displayed on an unembossed card, such as the cardholder's name, the card number, and the expiration year and month, is engraved or printed on the front of the card. The card is therefore smooth with no embossed or raised lettering or numbering, hence the name unembossed. Otherwise, unemobssed debit cards have the same shape and appearance as embossed debit cards.
If you have an electronic-use-only debit card, you may use this card online or in stores at electronic point-of-sale terminals like a regular debit or credit card. However, some merchants who make manual imprint, or non-electronic transactions -- pencil-traced imprint of your card information for delayed processing -- may not accept your debit card for transactions because the card doesn't contain raised lettering and numbering to make an imprint. Merchants are allowed to accept unembossed debit cards that display "Electronic Use Only" for manual imprint or non-electronic transactions, but the merchant places himself at risk. If the charge on your card comes under dispute, for example, due to insufficient funds, the merchant will receive a chargeback from the credit card company, not the cardholder.
If you want to make a debit card purchase at a merchant store that doesn't have an electronic terminal, you may be asked to use an alternate form of payment to complete the transaction. If a merchant without an electronic point-of-sale terminal accepts your debit card and incurs a subsequent chargeback, she may still be able to recover the chargeback and any subsequent returned check fees per the laws in your state regarding returned checks.