Signature-Based Purchases???

[10can]

I read an article that said that if you use your PIN number while using your debit card that you could be charged a fee.

The article said to always choose the credit option instead of the debit option.

I was also reading on the ING site where they are offering 1% cash back when you make signature-based purchases with your ING checking account debit card.

What is the difference here and why would they want you to choose credit instead of debit then pay you 1% cash back?

What is the bank getting out of this?

[sweeps]

One of the primary reasons that banks offer rewards for debit card users when the signature is used is because the banks themselves receive a “reward” from the merchant. Merchants pay banks a transaction fee each time a credit card is used. When you, the debit cardholder, sign your receipt instead of entering your PIN, the bank receives more money from the transaction. This is why you receive a higher reward for signed transactions over PIN transactions.

Source

[10can]

I tested this out at wal-mart and at the card reader I chose "credit" then swiped my card and then the enter debit PIN screen pops up even though I picked credit.

Wonder if their program defaults to debit that way they don't have to pay a merchant fee to the bank?

Thanks

[sweeps]

Some merchants pop up the PIN prompt regardless. I've found if you hit Cancel it considers it a signature based transaction. I don't think the card scanner can recognize a debit card from a credit card.

[10can]

Thanks, I will try the cancel button next time.

The real question is do we really win or lose by choosing the credit option?

If the merchant has to pay a fee to the bank then they raise their prices and we end up paying the bank after all.

[catlinye_maker]

I always use the debit option at the small mom and pop stores I frequent. It costs them less per transaction, and every dime helps at that level. Of course, I'm not charged a fee for using the debit option. I suspect that would vary from bank to bank, and if they started charging me I'd change my habits, or more likely my bank.

[jamai]

a merchant is charged more if the customer uses a debit card rather than a credit card. this is because credit cards make more money i.e. interest charges whereas, debit cards you spend what you have in the account.

[10can]

I didn't know the merchant had to pay a fee for debit card use.

Do you know how much these fees are?

Thanks

[catlinye_maker]

That's interesting, every small merchant I've asked about this issue said that they were charged less for debit transactions than for credit transactions.

[QueenOphelia]

Citibank's reward program gives you twice as many points for signature based purchases vs. PIN purchases on their debit cards.

For those who participate in a rewards program, check and see if this is true with yours.