Debit Card Processing

Credit cards and debit cards are not only processed differently, they also have different fees. In the case of debit cards, knowing how to process a transaction (online or offline) can lower your credit card processing fees.

Debit Cards:

Offline Debit Transactions
Debit cards can be processed as either offline or online transactions. An offline transaction is when a debit card is swiped like a credit card and the customer’s PIN number is not entered. Instead of entering her PIN, the customer signs the sales receipt. For this reason, offline debit is also referred to as signature debit.

Offline debit transactions are processed through Visa, MasterCard or Discover’s networks and are charged interchange fees and assessments.

Debit Card

Online Debit Transactions
An online transaction is when a debit card is processed by allowing the customer to enter her PIN number. A PIN pad is required to process online debit transactions.

Online debit transactions are processed through a PIN debit network instead of interchange and are charged fees from the debit network that processes the transaction.

Retail merchants can choose whether to use a PIN pad to accept online debit transactions since the customer is present to enter the PIN number. E-commerce merchants can only process offline debit transactions since the customer is not present to enter her PIN number.

Credit Cards:

Unlike debit cards, credit cards are always processed through Visa, MasterCard or Discover’s network making them subject to the card brand’s interchange fees and assessments.

Credit card interchange charges are greater than debit charges, and there are many more of them. Credit card charges also increase depending on the type of card (such as business or consumer) and the brand of card (such as rewards or standard). These variables can cause credit card transactions to be processed at 2.5% or more.

Offline Debit Vs Online Debit Vs Credit Card Charges
Offline debit and credit card charges are determined by adding interchange fees, assessments and your processor’s markup. Online or PIN debit charges are determined by adding PIN debit network fees and your processor’s markup.

Contrary to popular belief, online debit transactions are virtually always less expensive to process than offline debit or credit card transactions. Many people neglect to take assessments and the processor’s markup into account when figuring the final charge for each type of transaction.

A processor’s markup and assessments for signature debit and credit card transactions consists of both a transaction fee and a percentage (such as 0.45% plus $0.15). There are no assessments applied to PIN debit transactions and the processor’s markup is usually a single transaction charge (such as $0.20).