Merchant Services: PIN Debit vs. Swipe Debit

November 11, 2011

The Official Merchant Services Blog tackles the topic of Debit Card processing today. While the blog has extensively delved into the Durbin Amendment and the affects the legislation is having on merchants, one topic we’ve overlooked is Debit Card processing –– specifically PIN Debit vs. Swipe Debit.

Difference Between Credit, Debit, and Check Cards

First thing we need to do is define debit cards. True debit cards can only be accepted when a merchant is able to accept a personal identification number (PIN) from customers using a PIN pad. So for true debit cards, the only option is PIN Debit.

But transaction processing has been evolving. Most debit cards today are actually check cards that are mistakenly referred to as “debit cards.” The difference between a debit card and a check card is that a check card has a Visa or MasterCard logo in the lower right-hand corner where a true debit card does not. These cards are hybrids and can work as either a credit card or a debit card when used in a transaction. A merchant account allows a merchant to accept debit, credit and check cards.

Price Comparison

Prior to the Durbin Amendment taking affect, PIN Debit was the most cost effective choice for debit card/check card transactions. Swipe, or Signature-based, debit transactions carried higher interchange rates than PIN debit transactions for many years.

Once the Durbin Amendment took affect on October 1, 2011, the fees for both PIN Debit and Signature Debit were balanced. Swipe Debit now costs as much as PIN Debit for banks that are capped by the Durbin legislation. Swipe Debit is also, in rare cases, less expensive than PIN Debit in situations where the bank is exempt from Durbin rules. The change that the Durbin Amendment brought on has many merchants asking the question: If Signature and PIN debit are now capped at the same interchange fee, do I still need my PIN Pad?

Continue Reading – PIN Debit vs. Swipe Debit, Part 2

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