My bank rewards me with a minute percentage of the transactions that I process as credit instead of debit. Obviously they are either saving or making money by my doing this. Do they use different networks for credit and debit? Are there any other reasons that the bank might prefer me using my card in this way?
WAG is that the fee the merchant pays on a credit card transaction is higher than the one paid on a debit card transaction.
They use completely different networks and are processed differently. Although it doesn’t mean anything for how much you end up paying, the results are different for the bank and the merchant.
A debit card transaction is basically a straight money transfer and costs the merchant little. A credit card transaction means that that the merchant has to give a small percentage cut to the bank that owns the card. The bank is trying to get you to help them milk a little money from merchants by giving you a tiny cut.
When used as a debit card the transaction is completed in a short time.
Credit Card issuers want you to buy on credit and delay paying in full upon receipt of bill so they can charge the high rates and make money.
It is folks that carry a large CC balance and/or have their cards maxed out are on the short end of the stick.
There is no lending going on in the situation I’m describing. I am just selecting the credit option at the POS machine instead of debit. The money is still coming out of my bank account. I think Shagnasty answered my question pretty well.
It’s standard, to my knowledge, for credit cards to have a 2% or so fee go back to the issuer of the card. I’m not sure if this is also true with debit cards. If it’s not, there’s your explanation.
Percentage is the key. For my company’s merchant services, when a customer pays with a debit card, the bank charges me a flat fee (59 cents, I think) regardless of the purchase amount. With a credit card or debit run as credit, it’s a smaller per-transaction fee (like 18 cents) plus a percentage of the sale (about 2.3%). So if the amount of the sale is over about $20, the bank gets more if it’s a credit transaction.
The actual figures vary based on the merchant’s total transaction volume, what type of sale it is (retail, service, hotel reservation, etc.), etc. Rates are also higher where security risks are greater, like for mail/telephone/online orders.
Minor nit: If you select ‘debit’ for your transaction, you will be charged $1 - $1.50 per transaction, depending upon your bank’s policy.
I have truly never heard of that before although I am sure it has existed somewhere at some time.
The vast, overwhelming majority of debit card purchasing just get processed through a network your bank is affiliated with and deduct the money right from your account exactly as stated. That is it as far as the consumer is concerned and I do that type of thing many times a week as do millions of other Americans.
Are you thinking of cash withdrawals from an ATM outside of your bank? That would apply there but never for any debit card that I have heard of. Banks never liked processing petty checks from everyday consumers and debit cards were a welcome out for them.
Same here. If I were charged $1-$1.50 per debit charge at POS (point of sale), I’d be racking up $20-$30 per month in fees. Neither of my banks charge me for this service. Taking money out of a non-network ATM is a different story, however.
It depends on your bank. Some charge you unless you’re using one of their own ATMs. Some don’t charge you no matter whose machine you use.
But even if your own bank doesn’t charge you, lots of stores and rival banks’ ATMs will.
Wikipedia has more info.
There are two types of fees. The first is a charge from your own bank. They may choose to charge you for all withdrawals, withdrawals from other banks’ ATMs, or no withdrawals. My bank doesn’t charge me anything no matter where I use my debit card.
The second fee is a surcharge from the rival bank (or store terminal). They set their own fees as long as they warn you before the transaction. Your bank’s not responsible for that.
Wikipedia has more info.
Oops. Sorry for the double post.
Banks in Australia often charge you for EFTPOS… you usually get so many free transactions per month, then you’ve got to pay for each addition one (around 20c, depending which bank you’re with).
Obviously there are so many types of account and deals and so on that you can get, so your results can and almost certainly will vary… some never charge you for EFTPOS, others some give you so many free ones you couldn’t use them all, and others charge no bank fees but you’ve got to pay to do anything with your money except put it in your account and let it sit there.
One of the best things about my bank… not only do they not charge you for using an ATM that’s not theirs, they actually refund any fees that the rival bank charges for using their ATM.