Signature Debit vs. PIN Debit: Which Is Better for Your Business?

Does your business process debit card transactions? If the answer is yes, you likely know that your debit card processing fees can differ based on your processing method. In most cases, the main difference comes down to whether you allow signature debit or PIN debit cards. Read on to learn more about signature vs. PIN debit and how they impact your processing fees.

Signature Debit vs. PIN Debit

A signature debit transaction involves having the customer sign the sales receipt rather than enter a PIN. This type of transaction is forwarded through Mastercard, Visa, or Discover instead of a PIN debit network. Depending on which of the three card brands the customer is using, the charge fee for this transaction will be determined by the brand’s interchange fees.

As the name implies, a PIN debit transaction happens when a customer needs to enter a PIN to make a purchase. This causes the transaction to go through a debit network used by your processing company, which also determines the transaction charge.

Which Method Is Cheaper?

There’s no one-size-fits-all answer to whether it’s cheaper to process transactions with a signature or PIN. Ultimately, the cost of the transaction comes down to the fee structure between signature and PIN debits. Signature debits tend to have higher percentage fees and lower fixed fees per transaction, and PIN debits are usually the opposite of that.

As a rule of thumb, signature debits tend to be cheaper for merchants with low average ticket transactions (less than $10). If your ticket transactions are higher than $10, you’ll save more money using PIN debit transactions.

Merchant Account Markups

While you’re comparing signature and PIN debits, another factor you’ll need to consider is your processor’s markup. The markup is a small part of the overall processing cost, but it can still make a difference in the long run. The exact amount depends on the pricing model you’re using (interchange plus, flat-rate processing, tiered pricing, or subscription-based plan).

Regardless of whether you prefer signature or PIN-based transactions, slashing your processor markups is the simplest way to lower your debit card processing fees.

Debit Card Chargebacks

Transaction costs shouldn’t be your only consideration when choosing whether you should accept debit transactions. Depending on your business, you may also be looking to cut down on chargeback costs. If that’s the case with you, it’s worth noting that initiating a chargeback on a debit card is a more complicated process than initiating it on a credit card.

Beyond the issue of inconvenience, most banks won’t side with customers during a chargeback if they used a PIN. Knowing this can help you cut down on instances of friendly fraud, i.e. situations where the customer claims they didn’t make a certain purchase.

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