I have been using credit cards for more than 40 years in the US. I never sign the back of the card and have never had anyone check.
And just to confuse the debit/credit practice in the US, I have a store issued debit card (Home Depot), which is definitely a debit card-says so in the binlist given above. It is treated as a credit card, the charges are only applied to my account once a month. It doesn’t bother me one way or the other, but it just goes to show that there is very little if any structural difference between a credit and debit card in the US.
Huh? The ZIP code asked for is the one for the billing address for the credit card, which a thief is unlikely to know.
And yes it’s rejected if the input value is wrong after N tries (N=3 or 5), with the card likely locked from future transactions until the owner calls in to clear up some kind of problem (like they’ve just moved or are using a rarely used corporate card, and couldn’t remember the ZIP code).
So many posts, so much information, some of it wrong. I worked for a credit card processor that handled both US and Canadian merchants before I retired. That was three years back so I’m a bit fuzzy on some of the details now, not using the information every day.
[ul]
[li]Virtually all debit cards in the US have a Visa or MC mark on them, but not all.[/li][li]While practically all merchants are set up to take credit cards a smaller percentage are set up to take debit cards as well.[/li][li]If a debit card without a V/MC mark is presented to one of those CC-only merchants they have no way to process it.[/li][li]If the card has a V/MC mark, a CC-only merchant can process it as if it was in reality a credit card. On the cardholder’s end, the money is instantly debited from their account rather than added to a tab to be paid off later.[/li][li]In such cases the card will be processed using Visa’s or MC’s system to contact the bank.[/li][li]If the merchant has signed up to take debit cards, one of the debit networks on the back of the card will be used, even those with the V/MC mark.[/li][li]There were about 30 debit networks and since each network costs a merchant a bit of money at the end of the month, used or not, nobody signed up for all of them.[/li][li]Once in a while a debit card’s networks and the merchant’s networks found no matches in which case the card could not be processed. This became very rare as time went on and a V/MC-marked card would fall back on the V/MC networks in that case.[/li][li]Whether a card is credit or V/MC-marked debit can be determined by the card number; no contact with the network or cardholder’s bank is necessary. Therefore, a credit card machine that asks debit or credit lacks the processing power and/or memory to make the determination (or the programmers were lazy).[/li][li]In Canada a debit card can be linked to the cardholder’s checking and savings account, so ‘checking or savings?’ is asked.[/li][li]I don’t know if there are any MC-marked debit cards in Canada, but Visa-marked ones were introduced relatively recently. Merchants have to sign up for ‘Visa-debit’ service specifically rather than have it automatically included like US merchants do.[/li][li]A debit card with no chip does not have the PIN anywhere on the magnetic stripe; the cardholder’s bank determines whether the PIN matches or not.[/li][li]Chip debit cards have the PIN encrypted on the chip and a bad PIN is rejected before the transaction hits the network.[/li][li]Rates are lower for debit transactions than credit. The difference is just a few dollars per month for a small retailer but can add up to significant amounts for a large one. Knowing this, I always balked at those merchants who added a surcharge for debit transactions.[/li][/ul]
How could it make the determination when the customer might have a preference? Some banks charge a fee for true debit transactions but not for “credit” transactions on the same card. My mom works at a store that, for a short period after getting new card terminals, was unable to process debit cards through the Visa and MasterCard networks, and people were pissed. Some of them didn’t know their PINs and others had to pay a fee.
I question this last item. My local Mobil station accepts both credit and debit cards, but a sign on the pump requests credit first. Why would they say this if it costs them more money (and probably takes more time)?
I remember the first time a gas pump asked me for my zip code. I was puzzled as to why it was asking, but I dutifully punched in my home zip code. My sale was rejected. I figured out that my card was billed to my office which, although just a few miles from my home, was a different zip code. :o
Things changed after what is called “The Durbin Amendment” was enacted into law.
This applies in the United States only.
Debit cards were divided into two categories: Exempt (issued by financial institutions with less than $10 billion in assets) and Regulated (more than $10 billion). The Federal Reserve Board was ordered to issue regulations setting a cap on interchange fees issuing banks could collect when a regulated card is used. The FRB finally settled on 0.05% plus $0.22 per transaction. This cap applies whether the transaction is signature-based or PIN-based, whether it is processed through an EFT number (“online”) or thru a credit card network (“offline”). The networks immediately changed their interchange fees for regulated cards to the maximum allowed by law, in some cases increasing the fees.
Before we go on, let me make something else absolutely clear, the term “interchange” is widely and regularly misused all over the internet.
MERCHANTS DO NOT PAY THE INTERCHANGE FEE.
The merchant’s bank pays the card-issuing bank the interchange fee. Since the merchant’s bank is not a non-profit institution, it charges more to the merchant’s processor (which may or may not be a subsidiary of the bank) which then charges EVEN MORE to the merchant. What the processor charges the merchant is called the “merchant discount,” although you will often see it erroneously called “interchange.”
The processor can charge the merchant whatever it wants. Some charge the merchant a fee totally unrelated to the interchange rate. Some charge the merchant the actual interchange fee plus a markup. If you are Costco, Citibank eats the interchange fee in exchange for the right to issue its credit cards to your members.
So what does this have to do with why some gas stations prefer that you select “credit” at the pump? Since the interchange fee is the same for regulated debit cards whether you select credit or debit, often the merchant discount is the same. But some processors add what is called a “switch fee” to debit card transactions. That actually makes it more expensive to process a regulated debit card as “debit” than as “credit.”
What about exempt cards? Yes, the gas station could put up a sign that says “Please select debit for exempt cards and credit for all others.” Nobody would know what the heck they were talking about. But since nearly everybody has their checking account at Chase Bank, it’s not worth the trouble.
I’m in Aus. All of my credit cards support linking to 3 separate accounts. For some reason, no doubt historical, the cash/debit/credit machines always call the 3 “Cheque”, “Savings”, and “Credit”.
Like most Australians, I don’t have a real cheque account, so my “cheque” account is linked to a transaction account which is indistinguishable from an old-style (Australian) savings account. I think that the credit company (mc/amex/visa/etc) doesn’t care what accounts are linked to at the bank end: I think their billing agreement with the merchant and the bank is indicated by what the accounts are called at the card end, not what they are called at the bank end.
“Tap and go” always selectes the “credit” account, and there are a few other situations that used to do that. Otherwise I am offered a choice of the three accounts.
Back when I had a special bank debit card, I thin that I remember that it was normally treated the same by machines ( 3 accounts assumed), but the bank would not attach other accounts to it. I can’t remember what kind of card number it had on it.
This is the same as saying that (at least in Michigan), consumers don’t pay sales tax, merchants do, because the law specifically levies the tax on sellers. There are places in (at least) Michigan that will advertise “We’ll pay your sales tax”, and this is actually the default way things would happen except that merchants are allowed to pass the charge on to the consumer without increasing the nominal sales price.
As mentioned, the only merchant that does not effectively pay the interchange fee is Costco, and they only managed that because they have a lot of members and a lot of business. Everyone else may or may not be charged something called “interchange fee” as a separate line item. There definitely are banks that will explicitly charge merchants something called an interchange fee. I know this very well because for one such merchant I work on their books and it’s a separate transaction apart from the discount, not just a line item on a bill. You may well be right that the interchange fee that the banks pay V/MC is not paid by the merchants, but that’s only tautologically true, not effectively true.
Well, yes, of course merchants pay their processors a fee that covers the processors’ expenses, including interchange. And, as I mentioned, some merchants pay an “interchange plus” rate that is the actual interchange plus a markup and those merchants may see statements with the interchange and the markup separately listed. But the Visa/Mastercard interchange fees are available all over the internet. I don’t want anyone to make the mistake that this is what merchants pay. Costco pays less, most merchants pay more and the fee they pay, in some cases, may not be related to the actual interchange rate. For example, merchants who use Square pay 2.75% for swiped transactions and 3.5% for manual entries. These rates are in no way related to the interchange rates.
The sales tax analogy is not very good. A better analogy would be if the state sales taxes rate were 5% on food and 6% on food, but some sellers collected a flat 7% on all purchases.
I thought debit cards transferred the money to the seller almost immediately, and using a debit card as a credit card does not (although your balance shows the change right away). If there is a dispute, it is still easier to get your money back if the transaction was credit.
I think it is still true that consumer protections are still better for consumers in the USA for credit than debit (e.g, required reporting deadlines and max amount permanently lost). Similar reasoning applies to your financial institution sending you information via mail instead of online.
Also, if a merchant is hacked, your PIN might be out there.
This would be a Bad Thing.
I only use the PIN at ATMs. Everything else is credit; the risk is not worth the convenience (like also withdrawing money) to me.
I did not mention it in my OP because my little list was long enough, but in Canada chip cards were introduced some years back, much earlier than here in the US (and they were introduced in Europe years earlier than in than in Canada). For a while chip-and-PIN transactions were totally optional, then the banks started offering lower fees to encourage merchants to go that route, and finally CnP was made mandatory by the government (I don’t remember if it was Federal or all the provinces acting in concert). There was a year’s grace between the announcement and the mandatory date so merchants could get the hardware and/or software updates needed and it was a year of chaos and frustration for both the poor merchants and us on the help desk. The equipment was such that if the merchant could process CnP transactions and the card tendered was a chip card (pretty universal by that time) the transaction had to be run as CnP. If either question was ‘no’ – (usually the merchant) the transaction could be (had to be) run as swipe and signature. Merchants who had transitioned early in the grace period were calling us all the time to say that their customer did not know the PIN on their card and, “they’re telling me the guy down the street could take transaction as swipe!”
Insofar as bank fees are concerned, my bank (a large multi-state chartered bank) never charged me a fee for a retail transaction whether debit, debit-as-credit, or true credit (on a different card). There was a monthly fee for the checking account the debit card was attached to, waived if I had direct deposit for my paychecks then, SSA now, but no monthly fee on the credit card (a hellacious interest rate, though). Neither was there a fee for a cash withdrawal on the debit card at the bank’s own ATM but there was a fee for getting cash at another bank’s ATM and a hefty fee for getting cash on the credit card, even at the bank’s ATM. The bank encouraged use of the credit card over the debit card (a bigger chance at a profit) by awarding more points on the credit card, then finally dropping points on the debit transaction all together.
DesertRoomie was working at a gas-n-cigarettes station when the pumps started asking for the ZIP code and people would come in incensed that it was doing so. I told her to tell them it was for their protection. Imagine if they’d missed the pocket when they were putting card back in their wallet and it dropped to the ground unnoticed. Since there is no way to check against the signature on the card, some yobbo in an SUV could pick it up and pump 40 gallons of gas into their truck on their account.
Except for the first, all these are true. Whether they are significant enough to outweigh the convenience is a personal decision.
On the first, I can’t answer for the other processors, but with us, credit or debit, the transaction would ordinarily be funded to the merchant’s account the third day after it was submitted,* when we got the money from the card association. For a higher monthly fee, the merchant could get the money the next day because we were, in effect, lending him the money until the association paid us back. Typically because the float was more significant, only the larger retailers (say, a department store) would opt for this.
*When you swipe or insert your card, get the okay back from your bank, and happily trot off with your goods, is not the end of the transaction. It is stored in the machine until the merchant takes steps to ‘submit’ it, along with all the other accumulated transactions. Typically this is done every day at the close of day but sometimes (typically restaurants so the tips can be distributed) it’s every couple days and sometimes (typically 24-hour gas stations) at the end of the shift.