PIN Debit or Signature Debit

PIN Debit or Signature Debit: Which Costs Less?

Both PIN debit and signature debit transactions look the same at face value. They are both conducted on a debit card, so what’s the difference?

The truth is there are some significant differences when it comes to cost. How you process debit cards can significantly impact your bottom line. Most businesses aren’t aware of this and throw money out the window. Here’s what you must know.

What is a PIN Debit Transaction?

What is a PIN Debit Transaction?

A PIN debit transaction occurs when the customer enters their PIN into the credit card machine. Only they know the PIN,, and if they enter it incorrectly, the transaction won’t go through. The transaction doesn’t go through a credit network like a credit card does; instead, it goes through a debit network.

With a PIN debit transaction, the debit network ensures enough fees for the transaction to go through. If there are not enough fees, the transaction is denied.

What are the Processing Fees?

Unlike credit card transactions, PIN debit transactions don’t have interchange fees because they go through a different network. One downside, however, is you can’t choose the debit network through which the transaction goes, so you’re at the mercy of the fees charged by the appropriate network.

PIN debit transactions have a PIN debit network fee plus a processor markup. The fee is a percentage of the sale (usually lower than the credit card interchange fee) plus a fixed markup for the processor. 

What is a Signature Debit Transaction?

What is a Signature Debit Transaction?

A signature debit transaction operates like a credit card transaction. The customer slides or inserts the card and signs for the purchase. They do not enter their PIN into the credit card machine.

Most merchants call this ‘running a card as credit,’ or when the customer chooses the option at the credit card machine, they’ll choose ‘run as credit’ rather than ‘run as debit.’ Unlike a PIN transaction, these transactions do not go through the debit network. Instead, they go through the credit network and are subject to interchange fees.

How Processors Markup Debit Transactions?

The markup may seem insignificant compared to the total processing cost, but it can impact your expenses over time. The specific amount varies based on your chosen pricing model (like interchange plus, subscription-based plans, flat-rate processing, or tiered pricing). Like credit card transactions, processors mark up the transaction to take their cut. They have three ways to do this; understanding the lingo is important to help you decide.

  • Interchange Plus – This is the most transparent pricing method. You pay the interchange rate plus a predetermined markup.
  • Subscription-based pricing – You pay a flat monthly subscription fee no matter how many transactions you conduct, plus an interchange fee per transaction (usually $0.15).
  • Flat-rate—This is the least beneficial method. You pay a flat rate for every card, no matter the type, plus a markup between $0.20 and $0.30. The flat rate is usually much higher than the interchange plus method.
  • Tiered – This leaves the transaction costs up to the credit card processor as they create their own tiers for qualified, mid-qualified, and non-qualified transactions and requires a lot of research to determine what costs you might pay.

What are the Processing Fees?

Signature debit transactions have fees similar to those of credit cards. If you notice a network is branded on a customer’s debit card (Visa or Mastercard), You’ll pay the appropriate interchange fees for that brand for signature debit transactions.

To process a signature debit transaction, you’ll pay the credit card brand’s interchange fees plus the markup for the debit transaction. The markup is both a percentage of the sale plus a flat rate markup.

Impact of the Durbin Amendment on the Fees

Debit card processing fees were modified in 2011 by the Durbin Amendment, which was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the Great Recession. This amendment caps debit card charges for banks with over $10 billion in assets.

Consequently, two categories of charges surfaced: one for banks that issue cards under regulation and another for those that do not. For example, national banks are subject to restrictions on the fees they can charge, whereas smaller banks are free to set debit costs as they see fit.

Because many customers use debit cards for minor purchases and the debit interchange rate is restricted, the $0.21 transaction cost ultimately accounts for a more significant share of the overall amount.

PIN Debit vs. Signature Debit: Understanding the Differences

PIN Debit vs. Signature Debit: Understanding the Differences

While both PIN and signature debit card transactions serve the purpose of transferring funds between bank accounts, they differ in several key aspects:

  • Authorization: Electronic authorization is required for PIN debit transactions, so account balance checks are made to ensure there is sufficient money to cover the charge. For this reason, they are occasionally called “online transactions.” On the other hand, balance checks are not a part of offline or signature debit transactions. The merchant won’t get paid if there isn’t enough money in the cardholder’s account.
  • Speed: Although the cardholder’s checking account is debited for signature and PIN transactions, PIN debit transactions typically settle faster. This also somewhat lessens the likelihood of chargebacks.
  • Verification Method: Signature debit card transactions involve the cardholder signing a sales receipt, whereas PIN debit card transactions require them to enter a PIN to confirm their identity.
  • Security: PIN transactions are typically more secure than signature debit card transactions. The risk mainly arises if the PIN is stolen. However, for smaller transactions (usually under $20), retailers often skip the signature requirement, following industry standards. Signature debit transactions are also commonly used for riskier transactions like mail orders, phone orders, and online payments (even without a physical signature).

PIN Debit vs. Signature Debit: Which Costs Less?

Now, onto the big question—what’s cheaper: processing debit transactions as signature or PIN? Well, there’s no one-size-fits-all answer to this. It really boils down to the specific transaction costs and down to your average ticket amount. If you have higher ticket transactions, you’re better off with PIN transactions for the most part because you’ll pay a lower percentage per sale and a fixed markup.

If you mostly have lower tickets, you’ll be better off with signature transactions because you’ll pay a higher percentage but a lower markup. A higher percentage of a lower ticket isn’t as big of a deal as it is with a higher ticket.

What is right for your business depends on your business model and your chosen processor. Do your research, negotiate your prices, and see what works for you, but always read the fine print so you know all the details involved.

The Biggest Benefit of Accepting Debit Transactions

Debit transactions have many benefits, but the largest is the lower risk of chargebacks. Chargebacks or disputes are common and almost easy with a credit card transaction. Credit card networks give retailers two weeks to respond to a dispute, and if they don’t, the credit card company automatically sides with the customer, and you get a chargeback.

When disputing a transaction, using a debit card can be pretty challenging. The process is much more complicated and often favors the merchant, especially if the transaction was processed using a PIN. This is because PIN transactions are considered more secure, and it’s less likely that the customer didn’t authorize the purchase.

This helps to prevent “friendly fraud,” where a customer falsely claims they didn’t make a purchase they did. By reducing chargebacks, you can decrease overall costs and make accepting both credit and debit cards easier. Some companies might even consider taking solely debit cards, which your payment processor can set up using the limited acceptance schemes the card brands offer. However, since some consumers prefer to utilize credit for specific transactions, weighing the benefits and drawbacks of having fewer acceptance choices before making this decision is crucial.

How to Lower Your Debit Card Transaction Costs?

You want to accept debit cards because it’s another way to get more customers, but you must also watch your bottom line.

You can negotiate your debit card transaction costs, like credit card processing fees. If you do your research, know your terms, and know what’s average for your area, you can negotiate with processors to get the most attractive pricing.

Another great way is to choose one method – PIN or signature- so you know your processing fees and can track what they cost you. Your employees will have less of a learning curve when learning the system, and your customers will always know how to process their debit cards at your place of business.

Other Factors You Should Consider if You Are Processing Debit Cards

Before deciding whether to go with PIN or signature payment processing for your business, there are a couple more things to think about:

  • PIN purchases offer cashback: Providing cashback with PIN debit purchases adds convenience for your customers. Small perks like this can enhance the overall customer experience and boost business performance.
  • Chargeback risk: While some customers may dispute transactions regardless, it’s generally acknowledged that businesses have more protection against chargebacks for PIN debit purchases.
  • Understanding your merchant service agreement: It’s always wise to grasp the details of your merchant service or payment processing agreement before making any decisions. Partnering with a reputable payment processor is crucial for payment processing matters.
  • Faster settlement with PIN purchases: PIN debit transactions typically settle within the same or the following day. In contrast, signature debit purchases often take several days for the funds to reach your account.


PIN debit or Signature debit? Which is Better? Cheaper? There’s no clear-cut answer. However, by reading this guide, you should better grasp these two options. The decision between PIN debit and signature debit transactions hinges on understanding their cost implications and how they align with your business model. PIN transactions offer lower fees and faster settlement, making them advantageous for businesses with higher average ticket amounts. On the other hand, signature transactions may be more cost-effective for businesses with lower ticket amounts due to their lower markup percentage.

Negotiating with processors and choosing a method that suits your needs can optimize debit card processing costs. Moreover, the lower risk of chargebacks associated with debit transactions adds another layer of financial security for businesses.

For some, PIN debits might be the more economical choice, while others may find signature debits more suitable. Ultimately, the decision depends on factors such as the sale amount, the card network, your processor’s markup, and the PIN network.

Frequently Asked Questions

  1. What Sets Signing Apart from PIN?

    The cardholder signs a sales receipt with signature debit card transactions, whereas PIN debit card transactions require a PIN entry for identity verification.

  2. Do Debit Transactions Utilize Credit Card Networks?

    Signature debit cards follow the same network routes as credit cards and incur interchange fees imposed by the card brand.

  3. Is Using Your PIN for Debit Card Transactions Preferable?

    Using a PIN can significantly reduce the risk of fraud. If thieves obtain a card but lack the PIN, they cannot withdraw funds from ATMs or make in-person purchases.

  4. How Does Signature Debit Differ from PIN Debit?

    PIN transactions are swiftly processed and settled, with funds immediately deducted from the checking account. Conversely, signature transactions typically take one to two days to process and settle.

  5. Which Method is More Secure?

    PIN payments offer significantly higher security than signature payments because they require a PIN code from the cardholder. This means fraudsters would need the card information and the PIN to complete a transaction, or it will be declined. This extra layer of security helps prevent transaction disputes and comes at no cost to the merchant. On the other hand, signature payments are more susceptible to fraud and disputed transactions. This is mainly because signatures are not always required for purchases under $25 and don’t provide as much authentication as PINs.Additionally, many online merchants and e-commerce platforms default to signature debit payments, making them a prime target for fraudsters. Debit transactions conducted through mail and telephone exchanges commonly use signature debit and are more susceptible to suspicious activity. While PIN payments are not immune to disputes and fraud, businesses concerned about chargebacks and reputation damage due to security issues would be wise to promote and standardize PIN payments. fraudster target

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