I recently saw a magazine ad from Visa (not an individual bank). They were offering a cash prize for using the Visa Check Card (essentially a debit card issued by participating banks). Each time you use the debit card, you make an entry into their contest. The catch is, you have to actually sign the receipt. They won’t accept purchased cleared by using a PIN number.
Given that contests are run in order to persuade customers to do something they might not ordinarily do, why does Visa want you to sign your charge ticket? What difference does it make to them?
I use my Visa Check Card all the time. When I go to WalMart, Target, and the grocery store, I scan it through the POS terminal, and press “debit”. When I press “credit”, the terminal asks me if it’s okay to process as a debit instead.
So, what’s the difference - as far as Visa is concerned? I certainly know the difference between debit and credit from my side of the bank.
Because it’s easier to steal a PIN number than to forge a signature. If they’re going to enter you in their contest, with the possibility of having to give you a large sum of prize money, they wanna be absolutely 100% dern sure that it really is you, ObiWan, entering the contest, and not JarJar who happened across your PIN number and thought it would be cool to enter you in the contest.
When you use your debit card in a situation that requires PIN entry, the transaction goes through as a POS (Point of Sale) purchase and the revenue to be shared by VISA, the issuing Bank and others in the electronic chain is about .25 to .50 for the transaction.
When you have to sign a slip, it is processed through the debit/credit system and the revenue generated from the merchant is 2% to 4.5% of the total sale. That revenue goes to VISA or Mastercard, the issuing bank and others.
That is why VISA wants you to use it that way (and why WalMart doesn’t.)
I figured it was something like this, though i didn’t realize that the difference in the revenue generated was so great. So if I buy 500 worth of stuff (the max my debit card allows in one day), the only fees associated with that transaction are around .50, while the credit fees could be as high as $22.50? That’s quite a difference. No wonder they’re willing to sponsor a contest to make you sign the charge slip.
Of course, this seems to run afoul of the convenience of debit cards and PIN numbers.
barker is right. Latest issue of Consumer Reports had an article on this. Another way for the banks to make some more money. CR also said that some banks were charging you a fee every time you punched in your PIN (which sounds like a typical bank-sleazy way to screw just one more nickel out of you–or the merchant). I dunno about you, but the first time they charged me a fee, that’d be the last time I used a debit card; back to checks…
Duck Duck Goose funny you should bring up the sig. is more secure then a pin #. My wife lost some CC’s a while back (or they were stolen) and some fradulant charges made. I kept thinking that if they only required a pin # instead of a sig. that no charges would have happened.
Also on more then one occation I have signed my CC slips mickey mouse with out problem (and that’s not my real name)
… Because fradulent use of a credit card is covered under law. The owner of the card is not liable for no more than US$50.00 of those fradulent charges. If you report a stolen credit card under the terms of the account, you are not liable for any fradulent charges.
OTOH, a debit card has no protection. Someone who steals your debit card and cleans out your account means the money is gone. The bank is under no legal obligation to cover your loss. Most banks do so merely as a customer/public service gesture.
So when I use my debit card and they say “credit or debit” (and some merchants require PIN and others require signature and some seem not to need either), what are the pros and cons of each?
Jill
I’m interested in this too. Yesterday, at WalMart, I intended to use my debit card. I scanned it into the POS machine, but it failed to clear. It said there was an error. So, I handed it to the cashier and said “Let’s run it as a credit card, then.” She scanned the card and asked if I knew my PIN #. Of course, I do. She indicated that I should enter it on the POS keypad. I did so, and the transaction cleared. No signature required.
So, I guess I still don’t get an entry in Visa’s little sweepstakes.
When I buy gas, I use the Pay-at-Pump machine. It doesn’t require a signature or a PIN #. Is that cleared as a debit or credit?
You can get cash back, depending on the merchant. (Supermarkets usually let you get anything up to $50 back.) This is better than going to an ATM (that is not owned by your debit card’s bank), as most charge $2, plus your home bank will also charge a fee. Most debit-for-purchase transactions cost $0.25.
Credit:
There is no fee for purchases; the merchant pays the credit card company instead.
If you have bad credit and can’t get a “real” credit card, your debit card can be used as a credit card by merchants that require one.
If you only have, say, $5.01 in your checking account that the card is tied to, you can buy 5 full tanks of gas within about 2 days. (Note, you must use the card reader at the pump for this to work.) The gas station will only charge a tentative $1.00 for your gas purchase, only resolving the final purchase price after 2 or 3 business days. Just make sure to get the cash in your account by two days later, or the bank will charge you an NSF fee on top of paying the merchant.
Disadvantage:
Debit:
purchases cost $0.25. Use for cash back is only real good reason to use your card as such
Credit:
Can’t get cash back.
Similar to the gas-for-a-buck deal, restaurants have a similar deal, but they charge more. Anywhere from 10% to 20% more, to make room for the gratuity (tip). This is because most restaurant purchases are a two-stage process: the waitperson runs your card with the initial total, they get you to sign the slip with a tip (hopefully) included, then they (or the manager) re-run the purchase (via a transaction number) with the final total. If your meal was $20 and you only had $21 in your account, the initial run-through won’t be approved. If it were (base on just the $20), then you leave a “generous” $6 tip, the waitperson will wave you a fond farewell, then get pissed when they find that $26 won’t be approved.
I recently received a notice in my bank statement from Huntington National Bank that they are going to start charging me twenty-five cents ($0.25) for each debit card POS transaction (those requiring a PIN number and not a signature).
I suspect that this is going to become a standard. I also suspect once they get us used to the concept that the fee will rise in the near future.
I’m curious about the US having either credit or debit cards which require neither a signature nor a PIN to operate.
The only kinds of cards I can think of that we have here which don’t require some kind of validation for use are prepaid cards such as weekly rail tickets and the like. Even our pre-paid phone cards require you to enter an account number and a PIN each time you make a call.
Although I actually live in Canada, I also have a US bank account. My regular account is an Old Fart account so they waive the usual monthly fee of about $10 for unlimited usage, withdrawals from their machines, bill paying, cheques, etc. My credit card is also free (no annual fee), although that has nothing to do with age. I also have a Visa with another bank that I rarely use, but my wife likes to use it for mail order so if some order clerk misuses it, we know what happened. As for use of bank cards for withdrawal at another bank, I think you wind up paying 2 or 3 bucks, but I avoid that like the plague. We keep a whole other account going just in order to be able to withdraw money from during our annual Barbadian winter holiday.
The CR report, which I just read, obviously feels that a PIN is safer than a signature. The trouble is that the bank card from the US bank is also a VISA card so that while no one could get money from the account on it, they could make arbitrary charges. It is convenient since many place (e.g gas stations) are not equipped to use debit cards and they are awkward to use in restaurants, but I also feel it is dangerous. I suppose waiters could come around with wireless terminals and have you enter the PIN, but this hasn’t happened yet. Best would be some kind of biometric (e.g. iris patterns) programmed into the card and scanned automatically. As for signatures, most places don’t even look and I am sure most retail clerks couldn’t tell a fake signature anyway. I know I cannot, at least reliably. I think it is probably dangerous the way I have let convenience set me up for a real thief, but like most people I am too lazy to do anything about it.
one important point for UK dopers. If you buy something on a credit card, you are insured against faulty goods or company going bust etc by the card company. However, this is not true of a debit card, or credit card cheques
one important point for UK dopers. If you buy something on a credit card, you are insured against faulty goods or company going bust etc by the card company. However, this is not true of a debit card, or credit card cheques
I have a mastercard debit card from Key Bank. Several months ago they notified me that whenever I use it as a debit card I will be assessed a “Pin” fee; from that point on I started using it as a credit card. The problem is, to get cash, which I get when I purchase something at the store to avoid paying the exhorbitant ATM fees, you can’t do it with a credit card. So, now I am reduced to having to actually go into the bank to get cash in order not to pay a fee. I know it isn’t much, but without the ATM and the PIN fees, I am currently paying $10-12 a month in fees just to have a checking account and do online banking. On top of that Key bank charges me $3.00 everytime I make a deposit into my account, unless it’s a direct deposit. I am 110 miles from the nearest Key ATM so I can’t avoid their fee. I have thought about switching banks but I’ve had this account for 15 years and absolutely everything is tied into it, so it would be a major pain and inconvenience to change. But if they start assessing me one more additional fee I’ll be motivated.
I pay no fees; POS, in-house ATM, deposits (whether electronic, in person, or by mail), transfers, telephone transactions – it’s all free.
No minimum balance, I get my canceled checks back, and the VISA debit card is free. I only have to pay fees to use out-of-network ATMs (which does indeed cost $3 ($1.50 to each bank), plus the usual fees for bouncing checks etc.) I normally pay nothing for either of my accounts.
OTOH, neither account earns interest, but the pathetic interest rate on checking accounts really doesn’t make me miss it.
