Should I Require Pin Codes Or Signatures For Debit Card Transactions?

PIN Debit or Signature Debit

Opinions vary regarding whether PIN debit or signature debit transactions are the more cost-effective way of accepting customers’ debit card purchases, but the prevailing view seems to be that PIN debit is the less expensive option for merchants. Of course, smart business owners aren’t willing to accept the popular opinion at face value, instead digging deeper for facts. And the reality is a little more complicated than a simple either-or answer.

What are Signature Debit Transactions?

Before we dive into the details, let’s clarify our terms. Signature debit transactions are processed in essentially the same way as credit card transactions, in which the customer signs the sales slip or touchscreen signature field to authorize and authenticate the transaction.

What are PIN Debit Transactions?

In a PIN debit transaction, the customer instead enters the four-digit personal identification number linked to their debit card at the POS terminal in order to authenticate their payment. These two forms of payment processing have different cost structures for the merchant, so determining the cheaper of the two isn’t necessarily straightforward.

What’s Cheaper: PIN or Signature Debit Transactions?

Factor 1: Transaction Size

For a quick-and-dirty answer, take a look at your typical transaction value. If the ticket size of your sales is usually less than $50, it’s more cost-effective to run your sales as signature debit transactions. If customers generally spend more than $50 on debit purchases, you’ll save more money running your sales as PIN debit transactions. This is because PIN debit transactions have a flat per-transaction fee, while signature transaction fees are calculated as a percentage of the ticket value. Any time when the transaction value is low enough that the percentage fee is lower than the flat-rate PIN transaction fee, you’ll save money by going with signature debit transactions. Conversely, the flat rate of PIN debit transactions will be much cheaper on larger-ticket transactions.

Looking at your typical transaction size provides a good starting point, but unfortunately, there are many other factors involved in determining transaction costs, and a comprehensive understanding of your cost savings potential requires a closer look.

Factor 2: Regulatory Effects on Transaction Costs

Regulatory pressures play a surprisingly large role in influencing the cost-effectiveness of payment-processing options. For example, in the US, the Durbin amendment set a limit on the fees charged to merchants for debit card payment processing, but it applied only to cards issued by major financial institutions – those with more than $10 million in assets. This legislation effectively created a division between “regulated” and “unregulated” cards, depending on the size of the issuing bank. However, there’s no way to tell just by looking at a debit card whether it’s issued by a regulated bank or not, so you won’t find out if it’s subject to the fee cap until the transaction has been processed.


When in Doubt, Ask!

By taking a closer look at your merchant account statement or by contacting your account representative, you can find out how many of the transactions you process on a monthly basis are regulated versus unregulated. Your merchant account representative should also be able to tell you what the per-transaction fees are for both PIN debit and signature debit transactions, involving both regulated and unregulated cards. You can then use this information to determine whether your current payment processing setup is the most efficient in terms of cost savings, or if your customer base and their purchasing trends indicate that you would save more money in processing fees by switching to a different processing method.


“If customers generally spend more than $50 on debit purchases, you’ll save more money running your sales as PIN debit transactions.


Even a few cents per transaction can add up quickly, and the accumulation of little nibbles taken out of your transaction revenue can turn into a big bite out of your bottom line. By working with your merchant account representative, you can calculate the best way to optimize your payment processing in order to best fit the way your customers shop, thereby saving you the most money on merchant account processing fees. In general, a higher ticket size makes PIN debit processing more favorable while numerous, small purchases are better suited to signature debit processing, but it’s definitely worth talking to your merchant account representative about the other factors involved in determining your processing fees before making a firm decision to change how your debit transactions are processed.


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