Pin-based debit used to be FREE
Posted by: Curtis Stevens on January 11th, 2010


NY Times released a very interesting article last week about pin-based debit transactions.  I have been in this business for years and even I learned a few things about the history of pin-debit.  Pin-debit is starting to become very big business, a big percentage of all electronic transactions.  With the whole economy down and consumers trying to avoid creating themselves more debt, more consumers are starting to use debit cards more frequently than ever before.  When debit cards first started gaining traction in the 1980′s, the small debit networks didn’t charge any fees to process the cards using a pin number.    Sometimes, merchants even received a small kick back as the banks saved money by not having to process a check.  That all changed when Visa entered into the market with their Visa debit card that could be signed for and still attached to their checking account.  This then made the banks money and become appealing to all of them.

As you can see in the chart, the fees for pin debit has been steadily climbing.  You will notice the huge spike in 2007 and that is because Visa’s network (Interlink) removed the cap that debit networks always had.  The cap was a set amount that all transaction costs would not exceed, such as 55 cents, regardless of transaction amount.  By looking at the price in the late 90′s, you can see that they do not have very much cost to process pin-debit transactions. The big reason is they are tied to a checking account, which only gets authorized based on available funds.  Whereas credit cards are attached to lines of credit and consumers can default on that.  Debit cards however isn’t debt, but the same thing as writing a check and ut 100% secure for the bank.  If you do not take advantage of pin-debit transactions, why not call your credit card processing to set that up?  If they cannot handle this for you, then give us a call.

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