Why Do Lenders Want You To Use Your Debit Card Like A Credit Card?

A reader wants to know why Chase is pushing him so hard to use his debit card like a credit card when paying for things—they’re promoting a contest for people who do this, and on every insert or blank space in the paperwork that accompanied his newest card, they encourage him to always select “credit” over “debit” at checkout. Why?

To make more money, of course. Only this time, it’s from merchants, not you.

First we need to clarify something: just because you select “credit” and sign with your debit card, you’re not really making a credit card purchase. The money is still drafted from your account directly, it just takes a little longer. This method of using your debit card is called a signature debit, and it’s cleared via a different network than when you pay by punching in your PIN (which, logically, is called a pin debit).

Merchants have to pay more money for signature debit transactions than for pin debit ones. It’s in the card issuer’s interest to get you to use the debit card in the way that will generate the highest fees. If you’re going to pay with debit anyway, it’s cheaper on the merchant if you go the pin route.

Remember, though, that paying with a real credit card conveys certain benefits. It may give you more protection in terms of disputes or extended warranties, and in cases where the merchant places a hold—hotels and car rentals, for example—a real credit card will prevent your checking funds from being frozen indefinitely. Your bank may in fact extend those benefits to any signature debit transactions on your debit card, but you’ll have to contact your bank to find out.

(Thanks to Travis!)
(Photo: Travis Hornung)

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  1. taking_this_easy says:

    i thought merchants pay a single fee($0.35) per debit transaction, but a fee + % for credit

    or i guess for credit, the credit card processing company takes more of a %

    and using PIN, its kinda verifying ur identity(unless someone stole ur card AND pin), harder to say ur card’s been stolen

    • christoj879 says:

      @taking_this_easy: I pay the same as credit, 1.98% + $0.26 but I imagine the provider makes more on these than regular credit.

    • rworne says:

      @taking_this_easy:

      Well in some cases the merchants screw themselves. Take just yesterday when I was picking up lunch from Arby’s. If I use my card as a debit card, they charge me a $0.35 convenience fee and I have to use the shifty-looking device on the counter. But if I tell them it’s a credit card, I pay nothing extra. I don’t even have to sign!

      No brainer there.

      • Robert M Getch says:

        @rworne: Some consumers prefer to use their pin and will pay for it and merchants can charge a fee for this. Visa & Mastercard prohibits such charges.

      • Dethzilla says:

        @rworne: It’s illegal to charge more based on the payment type at the location of the transaction.

        • oneandone says:

          @Dethzilla: Not illegal – just against the credit card companies’ contracts / terms of service with the merchants. But not against the law.

    • gStein_*|bringing starpipe back|* says:

      @taking_this_easy: i hate to be an asshole, but if you say “your” instead of “ur”, your statements tend to have a bit more credibility.

      • jc364 says:

        @gStein: I would have to agree. While I don’t want to single out this instance, I do want to point out that there is a difference between a text message and a blog post. Using real English can lend a lot of credibility to anything you write.

      • ScottRose says:

        @gStein:

        Disclaimer: This is coming from a person that has yet to master capitalization.

        The word “asshole” doesn’t inspire real confidence either.

  2. supercereal says:

    I always wondered why I was often asked “debit or credit” after swiping my debit card…

    Though for the most part, I agree with the benefits of exclusively using a credit card, and I made that switch awhile back. If you’re responsible and actually have the money to spend, then there’s really no reason to use a debit card at all (aside from those intermittent, annoying CA gas stations that only take debit cards…).

    • Kogenta says:

      @supercereal: I’m guessing this is a US thing. In Canada if you try to use a Visa/MC branded debit card as a debit from US Banks in some places it declines as invalid card and ONLY allows it to go through as a credit transaction.

    • gStein_*|bringing starpipe back|* says:

      @supercereal: there are some places (see:walmart) that will not give you an option- if it’s a debit card, they ask for pin.
      (there’s a way to override it, i’d have to og back in and play around a bit to remember- either hitting CANCEL when the reader asks for your PIN, or it might have had to do with the self-serve checkouts. i honestly don’t remember)

    • usern4me says:

      @supercereal: Last time I was in Cali was about 10 years ago, so don’t know how things are now. Back then it was ARCO stations that would only take debit, and they had the cheapest gas. And how do you think they afford to sell cheapest gas? Cutting cost wherever they can! Debit cards cost less to retailers. You want cheapest gas *and* the convenience of using method of payment you prefer…no soup for you!

      I always find it interesting that lot of people (especially on Consumerist) complain endlessly about retailers trying to make a buck, yet they never take retailers’ costs into consideration. News break: they just pass the cost to you. One way or the other, you’re paying for those miles and points you earn on those credit cards.

      • esp13 has a pony named Steve says:

        @usern4me: Arco/AM-PM still only accepts debit at a $0.45 surcharge, which can negate the savings in gas prices. Some big-box grocery stores like Winco and Food Maxx also only accept debit (to pass the savings on to you) but don’t charge any fee.

      • bwcbwc says:

        @usern4me: Actually, it’s probably the folks paying cash (like the working class poor who can’t get credit) who are paying the most for your miles and points.

        Feel guilty yet?

  3. Sian says:

    if I used my debit card for purchases, I would certainly go the pin method to help retailers I like. I’ve only found one so far that cares though.

    • rworne says:

      @Sian:

      All the merchants I go to that ask me: “debit or credit?” I usually tell them “It’s either one, doesn’t matter”.

      They invariably run it as a credit card.

      The only exception are those places that charge fees to use debit cards.

      • Groovymarlin says:

        @rworne: It doesn’t make much difference to me in the abstract, but I always say “credit” because Chevy Chase charges me an exorbitant fee if I do the purchase as “debit!” So I guess they’ve decided they’re going to get their money, one way or another.

      • trujunglist says:

        @rworne:

        Same here, and it usually confuses the shit out of them surprisingly. I thought everyone knew that most debit cards have credit card power these days. They usually look at me and then I finally just say “credit……… OR debit!” but by that time they’ve already ran it through via credit heh

  4. roshambo says:

    It will really likely make them more money at both ends. The merchant will pay more for the processing and the consumer who doesn’t balance their check book will be more likely to get overdrawn and rack up fees. A debit transaction is instant and will be declined if the funds are not available. The credit transaction may not post right a way allowing you to make more transactions afterwards, even a debit transaction and then end up overdrawn once all the charges hit. Stick to cash or debit, you will stick it to the banks and likely save yourself money in the long run.

    • robodomo says:

      @roshambo: Debit cards will not be declined if the funds are not available, they will get overdrawn just like a checking account (which banks love because they get to smack you with a $35 fee)

      • stopNgoBeau says:

        @robodomo: Not with my debit card. If the funds aren’t there, transaction declined.

        • Yokai Monsters Spook Warfare says:

          @stopNgoBeau: I think it depends on the bank. Back in my (constantly overdrawn) college days, I switched banks a couple times (mostly to correspond with who did and didn’t put a hold on the checks I deposited from my parents) and each bank was different. Most often though, I was allowed to be overdrawn up to a point (somewhere between $100-$250, or for certain amount of time, depending on the bank) at which point my card would be declined at every transaction. I’m sure there was some sort of risk management calculation involved balancing the $$ earned from overdraft fees with the likelihood of never being paid for them.

          I’m so glad that I’ve gotten everything straightened out and I don’t have to deal with that mess anymore.

    • Robert M Getch says:

      @roshambo: That is not true of all banks, for example at US Bank you can overdraw your account with Pin based or even ATM transactions.

      The bank controls the processing system, I don’t see why you would thing that a PIN transaction would be unable to overdraw an account.

  5. zigziggityzoo says:

    When you do a signature debit, you’re protected against scams from visa/mastercard’s network. Not so when you do a pin debit.

  6. Sandaasu says:

    Unfortunately, sometimes the bank will make up that money in other ways, such as charging the cardholder to perform the transaction. People should check with their banks before changing their habits in this area. I would hope that they would have noticed such charges already though, if the card was being used without care for the processing method.

    • jnews says:

      @Sandaasu: This is true of TCF bank about 4 years back. TCF bank was charging 75 cents for using your PIN at a POS checkout. Of course, they didn’t charge anything for ‘sign on the line’ since they were getting their pound of flesh out of the merchant. I dropped them for a credit union which doesn’t do those kinds of shenanigans.

      • JoshRogan says:

        @jnews: Ha! My credit union used to charge you $3 per transaction if you did a POS transaction as debit instead of credit.

    • johnva says:

      @Sandaasu: If your bank does that, you really need a new bank.

    • Michael Belisle says:

      @Sandaasu: Some banks offer a carrot instead of wielding a stick, like USAA, which gives 0.5% cash back on signature transactions.

  7. Cat_In_A_Hat says:

    When I use my debit card at the grocery store, pharmacy/drug stores, or anywhere else where the swipe terminal is up high, I always opt for the signature debit. I just don’t feel comfortable enterting my pin when the person next in line is hovering near me.

    • adamczar says:

      @Cat_In_A_Hat: Can you explain why someone eyeing your PIN is bad? Wouldn’t they need your debit card to actually do anything with it? If someone knew my PIN, would they really just be able to walk into a bank and say “I don’t know my name, I don’t have a debit card, but I know my PIN,” would they really be able to get to my life savings?

      • oneandone says:

        @adamczar: If the customer behind or next to you has a good view of you entering your PIN, they may be more inclined to do something to get your card and use it. I’ve never worried about this, but I can see why some people might be concerned – especially in areas where groups of people might coordinate to rob someone.

      • SpitfireM1 says:

        @adamczar: At my bank, instead of asking for ID for a withdrawal, they ask you to swipe your card and enter your PIN. If they have your card, they have your name. ATMs don’t ever ask for your name or other proof of ID either – the PIN is the proof of ID.

        Since obtaining your card or at least its data could be as simple as downloading the data from the skimmer they’ve installed on the store’s card reader, both parts of the key – the card and the PIN – would be fairly easy to get if one was determined, even if the actual card never left your posession.

        For the criminal, having both halves of that puzzle makes it much easier for them to get away fast and clean and makes it much harder for you when it comes time to dispute any mischief. The bank simply says, “Sir, could you please prove that you didn’t withdraw $1000 from this ATM with your PIN, only half a mile away from your previous purchase and 15 minutes later, when you haven’t reported your card stolen until now and you had used it again some time later, proving that it was in your possession immediately before and after the transaction in question?” That turns into a much bigger can of worms.

        • adamczar says:

          @SpitfireM1: Skimmers? Holy dang, I’m keeping all my money in the back yard in a coffee can.

          To me, that’s like worrying about catching cancer by drinking out of plastic bottles. But I understand some people would worry about this, so to each his own I guess.

          • SpitfireM1 says:

            @adamczar:

            It’s easy to shield others from seeing your pin as you are entering it at the grocery store or at the ATM. It’s much more difficult to correct things after the fact if something were to happen. Protecting a PIN is very cheap insurance.

            Is the scenario as described unlikely to happen? Sure, though incidents of similar things have been widely reported and seem to be escalating. More importantly, do I want it to happen to me? I’d rather not have the hassle and to be out however much money while fighting with the bank for what could potentially be a very long time. The cost of being slightly paranoid in this instance is outweighed by the potential downside many times over.

            Suggesting it is too much of a hassle to shield your PIN from others is akin to suggesting that it’s too much of a hassle to lock one’s car. The PIN could be considered to be the key to the account, and should be safeguarded as such.

  8. Skater009 says:

    They just want to get everyone off the the cash , Banks do not want to hold alot of cash in there branches.

  9. iluvhatemail says:

    A lot of the small stores I go to around LA charge you to use debit if it’s under $10, but if you use it as a credit card they dont. Maybe because they are smaller they dont get the same processing deal as large businesses do?

    • Robert M Getch says:

      @iluvhatemail: This is because Visa & Mastercard do not alow their merchants to charge a fee to use “credit”.

      • noone1569 says:

        @Robert M Getch: Yep, I’ve fought with some merchants over that. Once, I even contacted Visa in order to get a copy of the service agreement to prove that they are not allowed. Visa now dis-allows that merchant to take their card. This has significantly affected business because it is in a high volume white collar area where people rarely have cash!

        • adamczar says:

          @noone1569: I’ve always thought it was because they were getting shafted with fees. If someone pays for a $1.00 candy bar with a credit card, they have to pay $0.35 + %, which eats their profit. I’m fine with something like a “5 dollar minimum,” and if you support small business don’t know why you’d argue the fact and not just always have a few dollars on you.

    • ohiomensch says:

      @iluvhatemail:

      That could be true. I have a merchant account and depending on the type of card, transaction, etc, we are charged different fees anywhere from 3.5% to 5.5% per transaction. It depends on the deal some banks have with VISA or MC. Chase might offer a discounted rate for someone using their Visa, but it could be more for their MC, or another bank might be higher. Its hard to know how much transaction fees are from month to month because of the variable fees each bank charges.

      One thing that I have noticed is that we get charged a higher percentage for people using debit cards as a CC, than people using a traditional CC.

  10. Skeptic says:

    Another reason is overhead. PIN transactions require realtime authentication with bank, which is a more expensive transaction for banks. Signature transactions do not, and cost the banks less.

    • Robert M Getch says:

      @Skeptic: Well not exactly, the bank still must allow the credit transaction to be approved, thats why the little machine still has to process the transaction and it can be declined.

  11. TWinter says:

    My credit union is pushing a new interest earning checking account with really great rates. The catch
    1. you have to have direct deposit
    2. you have to get your statements electronically
    3. you have to check your account balance on-line at least once each month
    4. you have to have 12 signature debit transactions each month.

    Meet the requirements each month and they pay 4% on your balance. Miss the requirements and the percentage falls to 0.5%

    • RonDiaz says:

      @TWinter:

      I have the same thing, it was 5.5% when I signed up last year. I assume they can afford it via the merchant fees or whatever. However on my account PIN based transactions still count towards the 12.

    • the_wiggle says:

      @TWinter: what credit union?

    • mac-phisto says:

      @TWinter: i saw a similar program at a local credit union recently. the only difference is it’s at least 1 direct deposit OR 1 bill payment per month & the rate is 5.5%V (or 0.5% if you miss it). what an awesome idea to promote cost-effective spending habits for the CU & reward the member at the same time.

      i would LOVE to implement something similar at my credit union, but our banking platform SUUUUUUUCKS. there’s no way we could track a program like that effectively.

    • Collie says:

      @TWinter: Same her, except PIN transactions count towards my number. Interest rate of 5%.

  12. wfgunn says:

    first, I have no charity for most retailers like grocers, car rentals, airlines, fuel stations, or drug stores like CVS or Walgreen’s.

    If your bank doesn’t have a Points program for your credit/debit card you should find one that does. Over the last 5 years I have used my card as a CC and gained a very nice high end DSLR camera, a gorgeous LCD 42″ TV, and two round-trip tickets to Jamaica.

    I also use this card to pay for Comcast online, ATT online, and any other business I have that will take a CC for that purpose.

    • johnfrombrooklyn says:

      Ahhh….credit card companies love point programs because the retailers are the ones that pay the fees for it; and credit card companies know that you – yes I’m talking about you – will spend more money on your card than you otherwise would have in order to get that brand new TV. So dont’ think for a second that those things were “free”. They weren’t.@wfgunn:

      • Employees Must Wash Hands says:

        @johnfrombrooklyn:

        I travel 80% for business and use points earning cards for all my transactions (hotels, airlines, meals, etc). When you rack up $1,500+ in expenses every week, the points add up very quickly.

        I don’t spend any more of my money to earn those points because it was never my money in the first place.

      • valsharess1 says:

        @johnfrombrooklyn: Yes, I work for a church, and we take donations by credit cards. A lot of people who donate choose to use their rewards cards so they can earn more points, and the fees are horrendous for us. We aren’t a big retailer that can afford to lose out on that money, but we have no choice other than not accepting credit cards which would hurt us even more. It’s dastardly.

    • Kevin5280 says:

      @wfgunn: I have a Rewards Program and you get triple points for sig debit over pin debit.

  13. Anonymous says:

    Navy Federal has a signature debit (VISA) and a pin debit card. Different cards with different procedures….all coming out of my checking account. I always wondered why…now I know!

    • suzieq says:

      @RussellAsteria: IIRC the signature debit works as a PIN debit too. The PIN debit is issued by default when you open a new account, you have to request the signature debit after the account is open. But its been 9 years since I opened my accounts, things might have changed since then.

  14. Shane Elliott says:

    thats odd. My chase account specifically waives my monthly account fees so long as I make a certain number of pin debit purchases per month.

  15. Esquire99 says:

    What really irritates me is when you select Credit on the POS terminal, and they try to force it to a PIN-based debit. You then have to know to hit cancel to get it to process as a signature-based transaction. I don’t have a problem with retailers trying to get people to use debit if it’s cheaper, but programming your card-swipe terminals to default to PIN-based debit regardless of what option is selected is pretty scummy.

    • mac-phisto says:

      @Esquire99: this is due to a settlement reached between wal-mart & visa, as well as a program by visa to get merchants to update their card machines to newer standards a few years back.

      before the settlement (& the need for updated machines/operating practices), it was always the customers right to choose. now a merchant has the prerogative to force you into a PIN transaction. most will counsel you on the work-around (rather than lose a sale), but that’s why you see PIN-first machines.

      incidentally, another result of that settlement was the reduction of visa debit interchange & processing fees at certain merchants (such as wal-mart) by ~30%.

  16. shortwave8669 says:

    PIN debit transactions are a flat cost say $0.35.

    Signature debit is a % of the sale amount say 1.50%.

    So it can be cheaper to the merchant for small sales if treated like a credit card.

    Large sales would be cheaper as a PIN transaction.

    In this case a $10 sale is cheaper to the merchant as a “credit card” sale than PIN debit sale. $0.15 vs $0.35

    Merchants need to also consider that monthly network fees may be required to access the PIN networks, say $10.

    Rule of thumb for a merchant is “the bigger the sale the cheaper a PIN transaction is compared to signature transaction.”

    • mac-phisto says:

      @shortwave8669: bear in mind that visa typically has a “flat + %” system, where the transaction initially costs, say 25¢, & then a % is levied on the total sale. so, using your numbers, the debit would still be cheaper (40¢ thru visa vs. 35¢ thru atm network).

      & i believe the % is typically between 1.78-2.78% for most merchants, but can be higher depending on your merchant code.

      • shortwave8669 says:

        @mac-phisto: mac-phisto your numbers apply only to signature debit transactions. Anyone can find the Visa (or MC) “interchange” or reimbursement rates online. These are the wholesale cost that credit card processors pay for signature debit transactions. But you will see no mention of the PIN debit fees because Visa (& MC) don’t charge for PIN debit. The “ATM” networks collect the fees.

        The differences between PIN-debit and Signature debit are often confused. Most merchants cannot track how many debit card they get vs the number of credit cards.

        I work for a credit card processor and can look at individual transactions and which of the 100+ categories of Visa or MC a single payment is charged at.

        Now some merchants get VERY bad deals from their card processors but that is different from what they should be paying. My experience is that most merchants have neither the time nor the industry resources to evaluate the cost for a single transaction. They are at the mercy of the goodwill of their processors, sadly.

    • Anonymous says:

      @shortwave8669: That is incorrect. I work for a large retailer and all transaction – be it debit or CC – have a fixed transaction cost plus a percentage transaction cost.

      A PIN debit transaction would be 1.92% plus $0.10
      A Visa debit transaction would be 2.5% plus $0.10

      I’m assuming most retailers are the same albeit with a higher negotiated fees.

      • shortwave8669 says:

        @CaitlynDorus: The rates & fees you mention are outrageously high. I think you may be mistaken about your company’s charges. For their sake I hope so.

        I work for a credit card processor and the fees are as I described. Sales with the 4-digit PIN are a flat fee. Sales without the PIN on the same card are a percentage of the sale amount.

        I look at individual transactions throughout my day and can assure you I know what I am talking about.

        The breakeven point will vary based on a merchant’s processor but the wholesale cost of the transaction is published as Visa or MC interchange rates.

  17. KarbonKopy says:

    I don’t know about some of you, but some places actually charge a small fee (Carl’s Jr is one of them) to use debit, so I use credit because it doesn’t cost me out of pocket.

  18. tedyc03 says:

    Something else that happens is that with a debit transaction it usually shows up in the account immediately as a pending transaction, while a credit-like transaction has to clear, meaning there’s the added likelihood for NSF fees. This is because it’s possible a transaction or two could “fall off” and cause you think you have more money than you do, while a debit transaction usually posts within 24 hours.

  19. hellinmyeyes says:

    I seem to remember on Consumerist a couple months ago there was a link to an off-site Flash widget that compared the various merchant transaction fees depending on the cost of the purchase and the type of card (credit, debit, etc) used. I remember that debit cards were cheaper for merchants in most circumstances. Anyone remember where it was located?

  20. ZoeSchizzel says:

    Our bank just started charging a POS (point of sale) fee for using debit cards. At $1.25 a pop! Apparently, this is a fairly new fee that banks are starting to charge. We get around that by using our debit card as “credit.”

    Our bank just started charging this fee, and we were not notified. Or if we were it was buried deeeep in some monthly statement. More and more banks are starting to charge a fee for using your debit w/ pin. So, watch your statements for that POS fee.

  21. trashbaby says:

    Using a PIN because you “like” a retailer vs credit doesnt’ work unless many people do it. The costs (realized or unrealized costs) of the customers using credit over debit/cash/etc is already factored into the goods you purchase, so whether you try to “help” by paying with pin doesn’t matter…you’re already helping by purchasing the item with the cost of credit purchase built in. I say use the system and get whatever rewards you would garner from using the credit feature. If your bank doesn’t give you debit card rewards like that then this might be a good time to shop around :)

  22. sponica says:

    I use credit when using my debit card because I get cashback…not a lot. I can’t remember what the “reward” is for using one, but there is one.

  23. Chols says:

    When I worked fast food in high school, our manager would direct us to ask “Is this debit?” when scanning a card. The thinking was if they weren’t offered the choice of credit, they would pick debit if indeed it was a debit card. Also, it was cheaper for us to run a PIN transaction than a signature one.

  24. twophrasebark says:

    Chase makes more money when you sign.

  25. VA_White says:

    USAA gives me a cash rebate for signature debit transactions. So I sign.

    • jenn7110 says:

      @VA_White:
      Yep, I’ve got USAA and get the same. Not a huge cash rebate, but it adds up and makes for a nice little surprise at the end of the month!

  26. catastrophegirl chooses not to fly says:

    this would explain why ikea offered me 3% off last night to use debit instead of credit.

  27. iMike says:

    Use a (real) credit card. Benefits:

    *Purchase protection
    *Extended warranties where applicable
    *Charge dispute rights that may be superior to merchant’s return policy
    *Cash back or airline/hotel/points rewards
    *Easy tracking of expenses (this is true for debit cards as well, but not so much for cash)
    * 20-40 day float before you have to pay (more if you’re willing to pay interest, though there are plenty of limited-time, zero interest cards out there)

    Given the above, it makes little sense not to use a credit card, if you have one.

  28. Anonymous says:

    My state (Minnesota) only allows credit transactions. If we push “debit”, the sale does not go through and must be redone. We don’t even have the option of selecting “debit”.

    • mavkato says:

      @ShreeparnaCadillaxing: i found that even “debit” cards from MN do not work as debit out of state. i was in PA a few years ago, tried to use my TCF card as debit, wouldn’t go through.

      it is also frustrating that pin pads at stores all offer the debit option but we can’t use it.

    • strayxray says:

      @ShreeparnaCadillaxing:

      I moved to Minnesota last June, and I have never heard of this. I use my debit card infrequently, but it certainly does work. The only reason I use the debit card is to get infrequent cash back, since I don’t have access to ATMs in my area. Perhaps it works for me since I’ve only used it at Target stores (credit card at all other retailers)?

  29. formatc says:

    My credit union always pushed the slogan “Use your pen, not your PIN” because it saved them money.

  30. Lucky225 says:

    Personally I always select “Credit”, merchant can’t charge my ass a fee.

  31. Anonymous says:

    Card issuers get a small portion of every use that is signature based. Plus if you bank with a large bank like WF they may be the card processor for the merchant, so they take a cut there as well. In some instances the bank can double dip there and make even more money…don’t you love banks!

  32. MsAnthropy says:

    I just don’t use my debit card, full stop. Cashback-earning credit card for me, thanks, then pay it in full using online billpay. I have to say that I am totally confused by the “credit or debit?” thing with debit cards – why not just process transactions made using a debit card as debit, and those using a credit card as credit, FFS? Why the “choice”? And as for the fee that’s invariably assessed for using a debit card as a debit card, with a PIN, that just… disgusts me.

    In (mainland) Europe, you’ve had to enter a PIN number at the POS with a debit card for aeons now. I’m from the UK, where we’ve only caught up with such technology relatively recently (like, oooh, about 5 years ago) – the introduction of “chip and PIN” and the insistence on PIN numbers for all debit card purchases caused all kinds of uproar when it was first introduced, but it quickly became obvious just how much more secure it was.

    Then I moved to the US where you can use your PIN number with your debit card, but will more than likely be charged for the privilege, and where if your card falls into the wrong hands, your bank account can be drained without any kind of safety measure being in place at all. Hmm.

    • johnva says:

      @MsAnthropy: The “credit” vs. “debit” thing is really stupid terminology, because it’s not credit at all. It’s online vs. offline debit authentication. I think some POS terminals started using that simply because the offline debit is processed like a credit transaction.

  33. Employees Must Wash Hands says:

    Last week I came across a gas station that had stickers on the pumps saying “Please Press Debit.” Clearly they were trying to push people away from running it as a credit transaction.

    I will not punch my PIN into a gas pump, so I pressed “Credit.” It went through just fine.

  34. dreamking says:

    This is always my problem. If I swipe as PIN, I get charged a transaction fee by my bank as if I were using a non-bank ATM. If I swipe as credit, the merchant pays a credit card transaction fee. I’d be happy to swipe as debit if I wasn’t being charged additional fees to do it.

  35. Thorgryn says:

    My financial aid debit card actually charges me a ‘pin fee’ if I dare to type in my pin number when making a purchase. It’s pretty much the equivalent of the fee charged when you go to a non network ATM.

  36. Julia789 says:

    The retailers always push the debit feature, sometimes they don’t even ask me “debit or credit” they just put it in as debit and hand me the keypad to punch in my PIN. It’s highly annoying.

    My bank encourages me to use the credit feature. This leads me to conclude that the credit feature is good for the bank, and the debit feature is cheaper for retailers.

    I like the debit feature because it’s handy, fast, and I can get cash back at some registers, saving a trip to the ATM. However, the protection of using the credit feature is nice, too. I think after thinking this over, I’ll use the credit feature whenever I can except on the occasions I need cash back.

  37. knightracer says:

    As an owner of a small shop, for debit transactions you can charge the customer the transaction charge. It costs us less because we’re passing on the charge to the customer directly. Honestly, do you expect mom and pop shops to want to pay 60 cents on your purchase of $1 gum? If you don’t want to pay it, you can very well go to a supermarket or other big store where they won’t charge you. A convenience store is about convenience and we have operating costs too. If we didn’t charge the customer for each transaction, we’d lose money on each sale.

  38. djmichaelangelo says:

    I got into trouble with Wells Fargo over this years ago – I had opened up a new checking account, and received a “debit” card with a Visa/MC logo on it. I made all my purchases (gas station, grocery store, Walmart, etc) using the “credit” option when they asked me, so I didn’t have to enter my PIN at the register. Somehow I lost track of my spending (I know, irresponsible me) and ended up getting overdrawn and charged tons of fees. Come to find out, if I had chosen “debit” instead of “credit” on my transactions, this never would’ve happened!

    I vowed from that moment on never to use an ATM/debit card with a Visa/MC symbol ever again. Period. My only bank card now is a regular old fasioned ATM card, with NO visa/MC logo on it. Banks love customers who use the “credit” option, because it racks up more fees for them. I on the other hand decided that I wanted to be in control of my money, that if I make a purchase at a retail cash register for $40, that if my checking account somehow inexplicably only has $30, that the transaction will NOT go through. If you choose “credit” on your card, then yes it will go through – and surprise, the next day you’ll get a hefty fee. Yet another way for banks to make their money. So I cut ‘em off at the pass – from now on, it’s only an ATM card for me, no Visa/MC symbol here.

  39. MrsLopsided says:

    I don’t understand why US Debit Cards have both a debit and a credit option. With debit you have the security of a PIN but if a thief steals your card and chooses credit he can bypass that verification step. So what’s the point of a PIN?

  40. MrEvil says:

    I don’t think Chase is making any money on the consumer side of the transaction, but if I’m not mistaken they’re a pretty big player in the merchant account game.

    I’ve had card processors break down the fees for me, and there was no mention of the cardholder’s bank getting a cut of the proceeds. Of course they could have been lying through their teeth.

  41. SadSam says:

    We don’t use credit, except for travel, but we use our debit Visa cards for all day to day spending (easier to keep track of than cash when it comes to Quicken). I always use my Visa debit as a credit card transaction whether I’m at a small retailer or a large mostly because of data breaches and security purposes and also because we get Visa points when we use our Visa debit card as a CC.

    The CC transaction fees are already built into the price of the goods/services so unless the mom and pop gives a discount for using cash I have no problem saying Credit when asked credit or debit.

  42. SuperSally says:

    I’d always do it as a PIN transaction (when I can) because the signature ones seem to take longer to show up in the account, for some reason. Sometimes a simple little five dollar purchase can take a week to clear on a signature transaction. Same or next day if I do it PIN.

  43. Anonymous says:

    I will NEVER use my debit card as a signature debit again…. and it is the merchant’s own fault. When you use the card as a debit, a hold is put on your money. Often, that hold is a fixed amount that has no bearing on the size of the purchase. It then takes 3 days for that hold to expire. Example, stop at gas station for $20 of gas. Merchant puts a hold on $50 (max allowed to pump) when you use the card as a debit. You bank then holds that extra $30 as unavailable until the hold clears. Here in Maine, the legislature is considering a bill to ban holds in excess of the purchase amount. Hope it passes.

  44. captadam says:

    I always choose “credit,” because I bank with a credit union, and I would rather save the credit union (and therefore, myself) the money.

  45. captadam says:

    Larger gripe: it seems we have no choice but to pay extra for accessing our own money anymore. My employer pays direct deposit, only. No checks, and certainly no cash. If I want the cash, I have to pay the access it through an ATM (I bank with an out-of-state credit union, so no local branches for me.) If I pay with debit at the store, my credit union has to pay extra just to process the transaction, leading to decreased financial benefits for me from the credit union. If I pay with credit at the store, the merchant pays to process the transaction, leading to higher prices for us all.

  46. johnsakalauskas says:

    On credit cards there’s generally a small cap on liability, and it’s rarely charged. Banks typically refund the amount with a stolen credit card, but for debit card fraud, you can potentially lose all the funds in your chequing account.

  47. dvdchris says:

    @ djmichaelangelo:
    Wells Fargo allows you to set up a line of credit that gets tapped anytime you are in danger of being overdrawn. This is regardless of whether you select debit or credit at a transaction.
    The $5 fee they charge to advance your account $300 is worth not having individual overdraft charges on each transaction.

  48. Jfielder says:

    Ahhh, so that’s why every time I shop at the little liquor stores and bodegas instead of being asked “credit or debit?” they just ask “debit?”, and I have to specify that I’d like to use credit.

  49. Rohini Jasavala says:

    ikea gives you 3% of the pin debit transaction to use on your next ikea transaction. this is probably why

  50. Bargaineering.com says:

    Debit transactions using a PIN pad incur only a fixed fee (slightly higher than the fixed fee of signature transactions), no percentage fee.

    Debit transactions using signature incurs the same fee as a credit transaction – a smaller fixed fee but then a percentage fee. What the actual numbers are will depends on the merchant (grocery stores pay less than mom & pops).

  51. Anonymous says:

    For those of us who actually try to support our local economies by shopping at small/local/mom & pop businesses, using debit is another way to help out. My loyalties are to my friends and neighbor’s businesses- not to Visa, Amex or Citybank.

  52. yzerman says:

    A long time ago I used to used Debit at the store. This changed around the time banks started charging ATM fees.

    The idea here is when you use your card as a debit at the store instead of the store paying a fee for the transaction to Visa or Mastercard, you pay a fee. somewhere between 1.50 to 3.00 a transaction.

    Basically its the same as going off your banks ATM network. You will be charged they want to make money off you.

    It used to also be a fact you could ask the store to add $20 to the transaction total and give you the difference back, I don’t see that happen to much anymore.

    The best way to pay is cash if you want to save you and the place you do business with money.

  53. twritersf says:

    I’m not sure if this is still the case, but I used to get charged, typically 25 cents or so, if I chose “debit” for the type of transaction. So I began choosing “credit” exclusively. I know this is more costly for the merchant. And I don’t care. The merchant is saved the cost of processing a paper check and waiting longer for the money. The merchant is spared the cost of bad checks. And the bank is spared the cost of processing paper checks as well. And yet I’m being charged for the improved efficiency and reduced loss? Nope. Not me. Until each and every merchant “gets it” that it is in their best interest to not assay a fee for a “debit” transaction, there will be no pushing of the “debit” button by me.

    • knightracer says:

      @twritersf: The small business is offering you a service. If they don’t charge you the fee, they will lose money on the transaction. How much do you think they’re making on your purchase of soda and candy if they have to pay 60 cents to process the transaction? There are very few if any small businesses/stores that will accept your check, so that’s a very weak argument. Just as easily as you can refuse the debit charge, the merchant can as easily refuse your sale.

  54. Anonymous says:

    I actually work for an issuer of credit cards and I will tell you that yes, we do earn more interchange on signature debit than PIN transactions. But it still makes more sense to sign as you do actually receive the same Zero Liability protection against fraud on your debit card if you sign (it’s based upon the network it goes through, if you sign it goes through the Visa network and therefore they offer their protections on it). If you use a PIN or if it goes through automatically because it’s under $25, you don’t have those protections. We do not charge our debit cardholders for using their PIN at point of sale but I do know some issuers do. All in all, you really do get more protections if you sign for a purchase.

  55. OneMHz says:

    I got into the habit of going with credit transactions because my main check/debit card was charging me a $0.25 terminal fee. They may have stopped, but I haven’t bothered to gamble the quarter to see.

  56. radiochief says:

    The ‘fee’ to use debit card per transaction is not new.

    Back in the early 90s when I had my first apartment, my Fleet Debit Card charged $0.25 for every debit transaction. And while I hated it, I hated writing a check for every little purchase even more. Eventually they got rid of the fee, and then I got rid of them… Then they bought the bank I switched to and that why I am at BoA now… Talk about fees.

    The problem with processing debit as credit is the amount of money they block of for the transaction.

    I know every here is a financial guru, but some us here do live paycheck to paycheck. Namely me. So when gas was $3.25-$4.00 per gallon, maybe that $58.00 fill-up I did gets $75.00 frozen in my account? Perhaps $100.00, what then, if the money is needed for some reason.

    That $42.00 might be needed for pediatric co-pay which then bounces because the last money in my account is frozen? So, that’s $35.00 for an overdraft and then possibly another $10 for a transfer charge even when I have the money in saving to cover it?

    No way. I know there are ways to combat it (and these fees), but if even paper checks are instantly verified- how come an electronic debit as credit needs 3-day freeze.

    Just another way to screw us.

  57. MBEmom says:

    Maybe this has already been addressed but I didn’t read all the comments. I was under the impression that if you used your card as a debit card (with a PIN) that you could be charged a fee like an ATM fee. Maybe they used to do this and I am just old. But I know there was a time when my debit card received rebates when being used as a credit card from my bank. I don’t know if that has changed but I have always used my debit card as credit for fear that I would be charged an ATM type fee. I have had my bank card declined when being used as a credit card if the funds aren’t in the bank, although that hasn’t happened in years so that could have changed, too.

  58. xeroseven says:

    I use the signature debit transactions because my bank, Capital One, donates a percentage of the amount to the JDRF. Hopefully this will one day benefit my son since he was diagnosed with type 1 diabetes when he was four. If you’re interested just pick the debit card with the JDRF logo.

    If that wasn’t available, I’d still make signature transactions to keep losers from getting my PIN.

  59. JoshReflek says:

    just pay with cash.

  60. Tonguetied says:

    When I buy from the bigger stores I use the signature debit method. When I buy from the Mom and Pop stores I use the pin debit method. I figure that helps the lenders desires for higher fees and gives a bit more to the little guys.

    Debit cards are incredibly convenient and I figure throwing some higher fees to that network helps to keep them afloat…

  61. soke2001 says:

    I kept on wondering why the opposite. Why are companies like IKEA suggesting that you use your bank card for debit instead of credit.

  62. sam-i-am says:

    I’m not sure this is true. I use my debit card in credit mode all the time and have been able to call up mastercard and do chargebacks, etc. Seems like if it goes through their network, I’m covered by their policies.

  63. pyehac says:

    Whenever someone tells me it doesn’t matter if they do either or when selecting debit or credit, I tell them its cheaper for us to go with debit instead of credit.

  64. Jeff Talbert says:

    I prefer using as signature debit because my bank has a point reward system. I hate shopping at places like Safeway, Giant, Bloom and other stores that when you click on Credit, and swipe your card it asks for your pin, then you must click cancel, then credit again and then sign. There are some stores that do not do this. Wegmans, Trader Joes, and a few others that allow you to use it the way you want to use it. If it was not for the point reward system I would have no problem using as a pin transaction. But especially in todays economy, any sort of benefit and perk you can get to get free stuff, I am all for it.