How do debit/credit-card swipe machines determine when a PIN number will be needed/requested in order to complete the transaction when proceeding as a debit? I have a gas station near my house which I frequently visit and I often go inside to purchase various odds and ends. I always pay for my items with my debit card, and I choose “debit” over “credit” when doing so.
It seems completely random as to whether or not the machine will ask for my PIN number before approving the sale; as there have been times when it asks for it for a $5 purchase and times when it doesn’t ask for my PIN for a $20 purchase. I never know if it’s going to ask for my PIN or not. And this is every Speedway, this Speedway just happens to be close to me.
Have you been checking your account to verify that they are actually being run as a Debit? If you use online banking, check to be sure. Some systems may allow the cashier to override the terminal you’re using. So even though you are clicking the “DEBIT” option, perhaps the clerk is just hitting his “credit” button. Can’t think of why he would do that. Maybe the debit machine was goes down and instead of telling all the customers that the debit isn’t working, he/she just hits the credit button.
Anyway, it is a starting point. Sign in to your online banking and verify that they are debit/POS withdraws and not credit purchases.
Oh, there is no doubt that they are being run as debit. The machine simply does not ask for my PIN about 50% of the time. I am familiar with some places not asking for PIN when the purchase total is under a certain amount, like $20, but that is definitely not what is going on here. I never use the “credit” option on my card, so I would have noticed a long time ago any suspicious account activity in my statements.
That’s really really strange, because the ONLY way it could be processed as a debit card is with your PIN. It makes no difference how much the sale is for. You’re essentially using the store’s POS terminal as an ATM machine. If the amount is less than $25 and you’re using it as credit it won’t require a signature. But that’s the difference between credit & debit, one uses a PIN the other a signature. And never the twain shall meet (debit cards NEVER ask you to sign). I would double check your bank statements, to the point of going to your bank and asking them if those are credit or debit, because I still find it difficult to believe.
BTW: Is there a reason you always choose debit? Usually your bank will charge you a foreign ATM fee ($2-$3) if you use debit, but not if you use credit. Plus you’ll usually accumulate ‘points’ when you use it as credit.
Some stores don’t require a PIN (debit) or sig (credit) on purchases under a set amount of dollars. McD’s I think does this under 25.00 dollars. You swipe and go, regardless of debt/credit. I think stores an set their own limit. I assume they verify later and either a plan for recouping money, or find it an acceptable risk.
The credit card companies set the limits, and these can vary by merchant type. The merchant can choose to use a higher limit, but will have to eat the cost if the transaction fails to settle.
Like others, I don’t believe that a debit transaction will go through without a PIN (background: I used to run a company that developed POS debit and credit software). To the OP: how do you know they always go through as debit? I just checked my bank statement and I cannot tell from that which ones were credit and which were debit (as an aside, you will get much better consumer protection if you put them through as credit).
In the interest of fighting ignorance: There is a relatively new type of payment processing called Pinless Debit. Pinless Debit allows online* debit transactions to be processed over the ATM networks (NYCE, Star, Pulse) without a PIN.
Pinless Debit has been made possible by a change in the Visa operating rules that was made in settlement of a Justice Department complaint. Previously, Visa’s rules required that any merchant who accepted Visa could not accept Pinless Debit. But when Visa introduced the program to waive signatures for small purchases, that gave Visa-processed cards an unfair advantage: You could just swipe your Visa card for a small purchase and go, but you had to stop and punch in your PIN number for a small purchase to be processed over an ATM network.
As far as I know, Pinless Debit has been restricted to certain very low risk transaction categories such as utility bill payments. Gas at the pump is generally considered a very high risk category. I cannot find anything that they have been expanding their merchant categories for Pinless Debit, but I don’t have any inside information.
*In the context of payment processing, the word “online” refers to payments processed over a network like the ATM networks. Payments processed over the credit card networks are called “offline” payments. It has nothing to do with the internet or with electronic automation.
No. McDonald’s doesn’t ask for my pin and I don’t sign - the same with other stores. What the OP mentions has happened to me, too. I’m there, index finger ready to push in the pin, and I’m just handed my receipt.
Which is cheaper for the store, debit or credit? I thought banks liked it run as a credit and stores as a debit?
Do you think it might have to do with the *time *of your purchase? Maybe that store’s owner or financial manager has calculated that most frauds occur after 11pm and before 4am, so you always have to use your PIN between those times.
It happened again today. I used my card to pay for a water, gum and a protein bar; the total was about 7 bucks and some change. I slid my card through the machine, selected debit, and waited; expecting to be prompted to give my PIN.
“Nope, not this time”, says the young cashier; and she hands me my receipt and says thanks. I ask her why my PIN wasn’t ask for, she looks at me in obvious ignorance and shrugs and says she has no idea.
I find this incredibly concerning. I’m sorry, but even if it’s limited to under $25 purchases, I often don’t have that much to spare. And what’s to keep a thief from running multiple purchases, or, since you mention ATMs, just keep withdrawing $20s?
Why would people freak out over typing in a four digit number? Is saving a single second worth having your money easily taken? What is the logic here?
Right. It’s never occurred at an ATM; rather at the debit-swipe machines at stores. And to the person who said that debit charges take an ATM surcharge every time they are selected; this is wrong. It is only when using your debit card at ATM locations that are not affiliated with your issuing bank.
Because my statement lists every single transaction made with my card and separates them between debits and credits. I can see every single purchase and the time and date (and often times the location) along with how it was processed. None of these transactions that didn’t require a PIN were processed as a credit.
The Durbin Amendment has kind of turned the world around and made it impossible to determine which is cheaper without a data base of fees and knowledge of the merchant’s processor agreement.
When you use a debit card to make a purchase (NOT at an ATM), the merchant pays a fee to its bank called the “merchant discount.” Then the merchant’s bank pays a fee to the bank that issued your debit card called “interchange.”
Since the merchant’s bank is not a non-profit institution, the merchant discount is greater than the interchange. There are two ways that the merchant discount is calculated: 1) Interchange-plus pricing. Here the merchant’s bank takes the actual interchange amount and adds an agreed-upon fee. If the amount of the interchange changes, the merchant’s fee automatically changes. 2) Tiered or average pricing: Here the merchant’s bank quotes the merchant a fee that is not explicitly tied to the interchange.
The Durbin Amendment established two categories of debit cards: 1) Exempt debit cards. These are issued by financial institutions with less than $10 billion in assets. 2) Regulated debit cards. These are issued by financial institution with more than $10 billion in assets.
For REGULATED DEBIT CARDS, all of the credit card networks have raised the interchange to the maximum allowed by law ($0.22 per transaction plus .05% of the total) and they have eliminated the discounted rates for small ticket purchases. On the other hand the major debit card (or ATM) networks (these are the networks that your transaction is routed over when you select “debit” or use your PIN) have raised their interchange for regulated cards to the legal maximum also. Some debit card networks have put a little variation in this like setting a cap for certain merchant categories or setting the rate to be the lesser of the regulated or non-regulated rate (PULSE). NYCE still has a small-ticket rate.
But. most debit networks add a per-transaction fee that goes by various names such as “switch fee” or “network security fee” on top of their interchange fee. This fee makes the interchange charged by the debit networks a few cents MORE than the fee charge by the credit networks for regulated cards.
So, in the case of regulated cards, it is very possible that if a merchant has interchange-plus pricing, credit will now be cheaper than debit.
For EXEMPT DEBIT CARDS, pricing is all over the map. There is no general conclusion you can draw.
Here is an interesting calculator that tells you what the various networks charge for debit cards. The first column (Pre-Durbin) tells you the interchange rate now in effect for exempt debit cards. The second column (Post-Durbin) tells you the interchange now in effect for regulated debit cards. These rates are for merchants in the “general retail” category, which does not include McDonalds or gas stations.
And keep in mind, that the interchange is what banks charge each other. As explained before, it is NOT what the merchant pays.
Ok, well I found out the details today (sort of). I went up to that Speedway again and upon using the swipe machine, I asked the manager (who happened to be working) if the transactions that didn’t require a PIN were indeed run as credits; thus not giving the customer the option of selecting debit. She said yes.
This prompted another question, what made the machine decide to allow the customer to choose between a credit or debit purchase? This she had no answer for. But she did tell me that the transactions that didn’t ask for a PIN were indeed processed as credits.
So these swipe machines sometimes allow the customer to choose which type of payment method they would like (debit or credit) and sometimes they simply automatically run the customer’s purchase as a credit; this is the current confusion I am left with.
*Oh, and I need to correct a previous statement. Apparently some banks do
impose an “atm-like” fee for every debit transaction made on a person’s card; yet no fees are imposed for credit transactions. Even though it’s the same money coming out of the same place. It seems like a bullshit way to make money to me.
I never know if it’s going to ask for my PIN or not. And this is every Speedway, this Speedway just happens to be close to me.