When a US transaction is run as “credit”, the customer signs a slip, and the merchant pays a percentage fee… whether or not it’s actually a credit-card borrowing, or a debit-card withdrawal? Both go through the credit-card system and take time to be posted to the customer’s account?
Meanwhile, if a transaction is run as “debit”, the customer enters a PIN, and the merchant pays a flat fee, whether or not it’s a (theoretical) credit-card borrowing or a debit-card withdrawal? And the debit transaction is done online and immediately?
This blurring is partly because US debit cards are Visa or Mastercard, and can use the credit-card payment system as well as online debit payment?
I ask because it’s just different enough from the Canadian system to cause confusion. In Canada, credit cards worked as described for the US. Debit cards, however, are on a completely-different network, Interac, that always used PINs. There was never an option to run a Canadian debit transaction “as credit”, because Canadian debit cards did not have Visa or MasterCard branding.
(I say “was”, “were”, because things are changing in Canada… All cards, debit or credit, are switching to using PINs (with chips), and there is now a Canadian Visa debit card. But the Visa debit function only works outside of Canada. Inside Canada, it apparently uses Interac like every other Canadian debit card.)
I guess my previous post was too long, I’m sorry.
The merchant pays a fixed fee plus a percentage.
For debit cards issued by large banks it is going to be MORE THAN $.22 plus .05%.
Yes, both go through the credit-card system.
No. The merchant does not pay a flat fee. (Although in a few merchant categories, particularly grocery stores, there is commonly a capped fee.)
It depends on which debit card network it is run through and the type of merchant.
Yes. It is done online and immediately.
Here is a calculator that tells you how much the merchant’s bank pays if the merchant is in the “general retail” category. The merchant’s bank marks that rate up and passes it along to the merchant.
Most debit cards are that way. But there are still “ATM-only” debit cards (that do not have the Visa or MC logo) available at most banks on request that work only at ATM machines and, in most cases, can still be used to make a purchase with PIN if they are linked to a checking account and the merchant is linked to the right processor.
The US has a large number of competing debit card networks similar to Interac.
Mastercard owns Maestro, Visa owns Interlink, and there are independent networks such as NYCE, Star, Pulse, Shazam, AFFN, and so on.