Do you know the difference between signature or PIN debit transactions?

Debit cards are often the middle child of payments processing, critical, but overlooked. Most merchants only focus on the credit card and ACH rates or don’t realize debit cards are priced separately by payment processors.

But debit cards are the most used compared to other payment types, and your price points will vary depending on how you process the debit payment.

Some businesses only process debit cards as a “signature debit,” it means you are using your signature instead of a pin and that you are running the transaction through the credit card network instead of the debit network.

So why does it matter? Is processing debit cards with PIN a wise idea for your business?

The difference between PIN and signature debit

Even though you would assume PIN debit and signature debit are processed the same, they are run differently and charge you a different processing rate.

The way they are processed is different since PIN transaction will require the cardholder to enter their four-digit PIN number.

Processing a debit card using a PIN causes the transaction to be routed through a debit network instead of being processed on the credit card network.

In the case of a PIN debit transaction, the debit network through which the transaction is routed will determine the charge for the transaction.

A signature debit payment means the cardholder isn’t asked to enter their PIN, but instead sign for the purchase. That transaction is then processed through Visa, MasterCard, Discover, or American Express credit network instead of through a PIN debit network.

Since signature debit is routed through a separate network, they are often known as “offline debit transactions” since they do not go through the debit network. They instead are run through the credit card network consequently being charged the appropriate interchange rates based on the card brand, entry method, amount, and industry type.

Is one better than the other?

Depending on your average ticket size, signature debit is sometimes cheaper, compared to a PIN debit rate, but PIN debit transactions are generally cheaper for larger tickets.

“By contrast, most PIN-based debit card transactions, such as those over the NYCE network, have average fees of about 25 cents — and slightly more for cards issued by smaller banks. Visa and MasterCard have PIN-based debit networks too, but many of the new terminals are set up to favor their more expensive signature systems” (Bloomberg News).

But they are vastly different when it comes to fraud.

There is a difference between the two debit types when it comes to how fraud and theft are handled. PIN debit is considered more secure because the cardholder authenticates their card with a PIN and, unless the PIN number is stolen, the transaction cannot be completed with a stolen card.

So, should you take one over the other?

PIN is safer because if the number entered is wrong the transaction will decline. With only a signature, unless the business is checking it against the card or driver’s license, it’s less secure.

By not checking for signature similarities or confirming drivers’ licenses, it opens you up to more potential fraud.

Are you unsure if you’re getting fair processing rates for debit and credit cards?

Contact us and we’ll be happy to let you know if your rates are the best as possible.