It is no secret that debit cards are a popular method for paying for goods and services. Customers use their bank ATM cards and check cards to pay for everything from a pack of gum at a gas station to monthly utility bills.
Debit card payments may soon take over credit card transactions! There were 507 million total debit cards in circulation in U.S. at the end of 2009. Debit payment transactions rose 17.1% to 6.38 billion, according to Visa and MasterCard.
Not all forms of debit are alike
There are three main types of debit card transactions:
Signature debit: Often called “Offline debit”, the check card is issued by a bank with a Visa or MasterCard logo. Cardholders can choose to use the card as a Personal Identification Number (PIN)-based debit card or a credit card (signature based). These types of transactions are processed like a credit card, but are often less risky for merchants because the issuing bank verifies the account balance.
PIN debit: This transaction occurs at point of sale where cardholders enter their PIN instead of signing a receipt. Not available everywhere, this type of transaction is common in retail environments, grocery stores and gas stations. It offers merchants a lower transaction fee because it is processed on the ATM network–MC/Visa fees are not charged. Merchants also benefit from a lower default risk as the account is verified for sufficient funds.
PIN-less debit: A newer type of transaction, PIN-less debit can take place without the cardholder present and is commonly used for recurring transactions, such as utility, education, mortgage and other bill payments. Similar to PIN debit, this transaction is processed on an ATM network, resulting in lower fees for the merchant.
On the horizon
Debit card processing could become even more appealing to merchants as the Dodd-Frank Act continues to develop. A provision in the law will restrict the fees that merchants pay banks and transaction processing networks each time a consumer makes a payment with a debit card.
TrustCommerce solutions give merchants the ability to safely accept debit card transactions. Because debit and bank cards are directly connected to cardholder’s bank account, fraud and other security risks are of great concern. Our TC SMART products are PCI/DSS secure. They remove account information from the merchant’s environment and store it securely, giving you and your customers peace of mind. Take advantage of the many benefits of accepting debit card payments, but don’t skimp on security!