What is cheaper: Pin debit or signature debit?

Not all debit card transactions are equal. For anyone who has used a debit card there are times that a signature is required and there are times that a PIN is required. There is a reason for that.

For anyone who has used a credit card to make a purchase they have had to affix their signature someplace. Signature debit is no different. It gives the feeling that the card is being run as a credit card but it is still processed as a debit card and charged the proper interchange fee. A PIN debit transaction requires just that: a customer has to enter their PIN number. Again the transaction is routed as debit and charged the appropriate interchange fee.

There are actually different interchange fees for both, which can make a difference. For smaller purchases signature debit transactions are cheaper, figuring that the sheer volume of them will generate enough via the network fee and transaction fee. The transaction fee is a set price, usually only something like $.10 to $.15 and a processor is allowed to mark it up. The network fee will usually be something like .9% of a transaction. Smaller transactions can yield only a few cents to a dollar but if thousands are made the total fee can be quite high. PIN debit transactions are cheaper for higher dollar transactions. The network fee for PIN debit will usually be lower, something like .8% with a slightly higher transaction fee. It may not seem like much but that .15% can lead to huge savings on high dollar transactions.

For a merchant running a business like a convenience store or small boutique signature debit will probably be a cheaper option for them. For something like an electronics store or appliance store that deals in transactions over $100 the PIN debit option will be better.

Of course all of these are still cheaper options when compared to the interchange fee that a credit card will receive. Other benefits to accepting debit cards include a reduced risk of fraud as a customer who uses a PIN will have a harder time making a chargeback. Chargebacks are much harder to initiate with a debit card and if the correct PIN was entered banks will side with the merchant in nearly every instance.

So, which debit option is right for you? Working with a reputable processor like JLE can help you figure out what option is right for you.