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Signature Debit vs. PIN Debit

There are two different forms of debit cards: Signature Debit (offline) and PIN Debit (online). Debit cards are linked to the customer’s bank account and generally hold both capabilities of being signature and PIN based. Whether you choose “credit” or “debit” at the POS will determine whether it is an online or offline transaction.

Signature Debit
When you use a debit card and choose “credit”, the merchant requires a signature to authorize the transaction. There is no PIN number required. Offline debit cards tend to be routed through either MasterCard or Visa, like a typical credit card transaction. The logo for the association is normally on the front of the card. These types of transactions are debited from the customer’s account about 2-3 days after the purchase, on average. This is because the offline transaction uses two separate messages for authorization, clearing and settlement. The good news for consumers is that they do not normally pay a fee for signature-based debit transactions. However, merchants are less likely to prefer signature-based as they historically have higher fees and risk to accept than PIN based debit. This is partially due to the chance that the user might be forging a signature.

PIN Debit
Using you debit card and choosing “debit” at the POS, it requires you to enter your personal identification number. PINs can be anywhere from 4 to 12 digits long. When the PIN number is entered, the transaction is routed through electronic-funds-transfer (EFT) networks such as Star, Pulse, NYCE, etc. The EFT network is normally located on the back of the debit card. PIN transactions use a single message for authorization, clearing and settlement and unlike signature debit, the account is debited immediately. It is very similar to an ATM withdrawal. The issuing bank may charge the consumer a fee for using online transactions. This is normally the preferred debit option for merchants because fees for accepting this card are lower than signature-based. This linked with the need for a valid PIN and immediate debiting of funds make these transactions much less risky.

Statistics show that debit cards are now the more favored payment method over cash and credit cards. Both forms of debt transactions are popular but most consumers lean towards PIN-based debit because they feel using their unique PIN number is more secure, easier, and faster than signature based debit.

If you have further questions regarding Signature or PIN-based Debit, please reach out to us! We’d love to hear from you!

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