Not too long ago it was less expensive for a business to process PIN debit transactions than it was to process signature debit transactions. This was due to the fact that PIN debit involved only a single transaction fee without a percentage charge, and a signature debit charges involved both a transaction fee and a percentage fee.
For example, a PIN would cost $0.25 where a signature transaction would cost 1.05% plus $0.20. It doesn’t take too much math to figure out that PIN used to be less expensive.
However, this is no longer the case. Contrary to what many ill-informed credit card processing sales representatives still tell their clients, PIN debit charges now involve both a transaction fee and a percentage fee, just like signature debit.
The change in pricing that occurred a few years ago, along with regulatory changes brought about by the Durbin Amendment, have made it a little more involved to calculate whether a PIN or signature transaction is less expensive.
Figuring out whether signature or PIN is less expensive must now be done a per case basis because a business’s average ticket plays a big role in calculation the cost associated with each method. A business’s location will also play a role in determining with transaction method is cheaper.
The Durbin Amendment capped the fee that large banks (banks with $10 billion or more in assets) can charge at just 0.05% plus $0.22 when businesses accept their debit card. However, small banks with less than $10 billion in assets are exempt from the Durbin cap.
Businesses located in a rural setting where most banks are small community banks or credit unions will likely see the majority of their signature debit volume running as unregulated. Conversely, businesses located in urban areas where most banks are large institutions will likely see the majority of their signature debit volume run at regulated rates.
The Durbin Amendment capped briansclub login signature and PIN debit rates at exactly the same rate of 0.05% plus $0.22 thereby eliminating any cost benefit each method offers for unregulated transactions.
Another factor in determining the cost of signature debit versus PIN debit is the processors markup over actual cost. Most processors charge only a small transaction fee to process a PIN debit transaction, and a percentage plus a smaller transaction fee to process a signature transaction.
For example, a process may chage 0% plus a $0.20 transaction fee for PIN debit transactions, and 0.25% (interchange pass-through pricing) plus a $0.10 transaction fee for signature debit.
Businesses with low average sale amounts will pay less by using signature debit instead of PIN debit because the transaction fee is higher for PIN debit, which will have a large impact on the smaller ticket amount. Conversely, businesses with a larger average sale amount will pay less by processing PIN debit transactions whenever possible because the percentage charge associated with signature debit will have a greater impact on their higher sale amount.