A question often asked is, “When I use my debit card, should I use my PIN or have it swiped like a credit card?” The question is asked because consumers want safety, security and cost effective measures.
For safety and security, it has been the use of the (Personal Identification Number) PIN pad. Visa Interchange and MasterCard Interchange offer some of the lowest rates to process when a consumer uses a PIN pad. Why? Because only that consumer is supposed to know that PIN number. A thief can use use your debit card if it is swiped, but not if it’s PIN debit.
The PIN debit is a very cost-effective way for the merchant to pay their credit card processing fees. Since the transaction travels over the ATM network, considerably lower fees can be available.
Let’s put that on hold for a moment while I share with you an experience I had yesterday. I received my new business debit card from the bank. It has in bold “Important Message: Credit or Debit, which should you choose?” It continues with:
When paying with your Debit Card, you’ll be asked to choose “debit” or “credit”.
We suggest you always select “credit”. We know it’s confusing as your Debit Card is not a credit card, but the money for your purchase will still come out of your checking account even though you didn’t select “debit”. And since you selected “credit”, you won’t have to enter your Personal Identification Number (PIN) in public for added security.
Whoa! The bank is asking for you to run a debit card as a credit card? Why?
It’s simple. The current profit the issuing bank (the bank that gave you the debit card) realizes is 1.03%, when the card is swiped. This is paid by the merchant. On top of the 1.03%, there are Visa and MasterCard Dues & Assessments, plus the small mark-up from the merchant services company. If the consumer runs the card as a PIN debit, the transaction runs on the ATM network. This means the bank doesn’t get its 1.03%.
My bank message also said I’ll save time by not entering my PIN number if I run it as a credit card. What they don’t tell you is you will have to sign the receipt for a credit transaction, but you won’t have to sign for a PIN transaction. PIN transactions are faster than having to sign a receipt.
So Swipe or PIN entry? Let’s recap. PIN debit makes cost-effective sense for the merchant, as well as safety, speed and security for the consumer. Okay, so maybe the bank didn’t get its 1.03%. We’ll leave that for the federal bailout.
For more information, you can reach Jon Perry at 877.577.3779 or through the contact form below.