I am not sure I was able to succinctly describe my question in the title.
Lets look at four situations:
- I go into a Chipotle restaurant. I hand the casher my credit card, he swipes it on his machine and hands it back to me. Simple.
- I go to another store and either the cashier or the kiosk asks me if it is debit or credit. I have to choose the right one.
- I go to a gas station down the street. I swipe the same card in the pump’s slot. It then asks me if it credit or debit.
- I go to another gas station. It has physical buttons for “credit outside” and “debit outside”. I don’t use those, I just swipe my card and the pump never asks anyway.
So do they need to know if it is credit or debit or not to process it?
My only theory is that the businesses that distinguish between the two types are the ones that might give you a lower price because it does not include a credit card surcharge (most common in gas stations.) However, I know this is not strictly true because some stores still ask if it is credit or debit, and the price does not change.
If it is debit, you have to enter your PIN. A Visa check card or similar can be debit or credit depending how you use it. It has nothing to do with where the money is coming from. Credit transactions cost the retailer more than debit transactions. For you, it may not matter, unless your bank offers incentives for using the card as credit.
Even if the money comes from your checking account, unless you enter your PIN, it is ran as credit. If you enter a PIN, its debit. Just different systems.
Some processing systems, at the point of sale, need to be “told” whether it’s a credit transaction (in which case a signature may be required, depending on the system and the purchase amount) or a debit transaction, in which case a PIN will be required. It appears to me some other systems (or perhaps it’s the merchants) automatically decide to process everything as credit, thus never needing a PIN.
If I recall correctly. Most/many debit cards can be processed either way, but it’s cheaper for the business to use the debit approach.
I think credit cards are something like a flat fee of $0.25 plus 2.7% of the transaction, but debit cards are just a flat fee of something like $0.25.
However, there is a fee for them to just attempt to process the card, at least in the case of credit cards. I’m not sure about the debit cards. If they get charged to auth the debit card, then they wouldn’t want to guess, which is why they would ask you.
If it’s a debit card and the system runs it as a debit transaction, you have to enter your PIN. If they run it as “credit”, many card processing systems charge an extra fee, about 20 cents. The 20 cent swipe fee only applies to credit transactions, not debits, so grocery stores have an incentive to get you to enter your PIN so they save 20 cents. Not all systems are like that; some of them just run everything as credit and there’s no difference. But IIRC there’s some law that prevents card processors from charging a swipe fee for debit transactions.
A typical grocery store transaction goes like this. If you buy $30 worth of groceries, the store has to pay…
(credit) 20 cents swipe fee plus 2%, total of 80 cents.
(debit) no swipe fee, just 2%, total of 60 cents.
Please note that if your card has frequent flyer miles or “rewards points” on it, the store has to pay an extra 1%.
Another consequence of this is that the rules regarding minimum transactions are different for credit or debit. Often, there’s a $5 minimum purchase when paying with a credit card, but no minimum if it’s a debit card.
A card swipe, if it has enough storage, can hold all the bin ranges (that is, card number ranges) to tell if it’s debit or credit. Debit cards are all issued within certain ranges of numbers (so are all cards, for that matter, but the point here is that’s how the device figures it out).
So some card swipes can tell if it’s a credit or debit just by looking up your card number in its tables.
Those card swipes need more storage, as I mentioned, and an easy way to update their data, because new card number ranges are released from time to time.
So lots of mom and pop places won’t have that, unless they subscribe to an ‘upscale’ credit solution.
I can’t believe I just used the word ‘solution’ like a blowhard business do-nothing, unironically.
Smaller cheaper card devices can’t tell, but like others have said, they prefer debit. So they ask you. Chipotle, McDonalds and the like would rather eat those pennies in the name of faster throughput of customers and less training for the workers when a customer is dumbfounded by all the yes/no questions they face.
There is one other way a store can do it. They can process it to a central place, but before actually sending it off to the bank for authorization, look up the card number on a mainframe’s tables, and send back a request for PIN if appropriate. But again you aren’t going to see that except in larger chains.