In Credit Card Processing

Some businesses often assume that accepting debit cards will result in the best rates for credit card processing fees. However, this is not always the case, as it largely depends on how the debit card merchant processing is processed through the card terminal. Before we discuss the differences on how transactions are processed, there is one key concept you need to understand:

  • Debit cards are always considered a debit card. It does not matter whether the payment is processed using a PIN or as a credit (signature) transaction. The card is still a debit card.


Where the confusion arises regarding this concept is due to how transactions are processed. The easiest way to think of this is that debit transactions using a PIN are processed on the PIN-based network, while those transactions run as credit are processed on the credit card network (i.e., Visa, MasterCard, etc.).

In addition, all debit transactions, regardless of whether they were processed as a PIN-based transaction or a credit transaction, are regulated by the established debit card rules. Businesses sometimes confuse this important detail and assume the transactions they run as credit fall under the credit card rules, but they do not. In fact, most credit card regulations list specific exclusions that apply specifically to debit cards.

Now that you understand this concept, let’s look at how debit card merchant processing works, and the differences between regulated and unregulated debit cards. The amount charged for processing debit cards depends upon the issuing bank and whether it considered regulated or unregulated.

Regulated banks are those that have assets over $10 billion, while unregulated banks are those that have assets less than $10 billion. This affects merchants because there are different fee structures for regulated and unregulated debit card transactions.
Credit Transaction
Regulated transactions are fairly consistent in the fee structures, so it does not matter how the transaction is processed—PIN-based or signature. For unregulated transactions, the fee structures vary and are directly related to how the transaction is processed.

For instance, unregulated PIN-based transaction fees are less when the purchase amounts are larger and greater when the amounts are less. On the other hand, unregulated credit (signature) transaction fees are less for smaller transactions and more for bigger ones.

The reason for this variation has to do with the network used to authorize the payment. Each network charges a percentage fee, along with a transaction fee. PIN-based transactions have a lower percentage fee and higher transaction fee, while credit transactions are the opposite—they have a lower transaction fee and a higher percentage fee.

To ensure you are paying the lowest amount of fees, consider the price of items your business sells and recommend to your customers to use the method with the lowest fees—debit for larger priced items and credit for smaller priced items. For more information about processing debit card merchant processing or the right equipment to fit your business needs, please feel free to call Leap Payments at (800) 993-6300 today!

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