Debit card processing with or without PIN, what's the difference?

While most merchants know they should process debit card transactions, most do not understand how to take full advantage of accepting debit cards. Read more below about the differences between online and offline debit card processing.

Off-line Debit Transaction

The most common way to accept debit cards is an "off-line debit transaction." In this type of sale the merchant accepts a debit card the same way in which they would accept a normal credit card. The card is swiped through the terminal and the customer signs the receipt. As far as the merchant is concerned there is no difference in the way a credit card or an off-line debit card is processed. The one thing merchants must remember is that the debit card must have the network card logos on it. Cards that do not bear the network be processed off-line and will not be approved.

On-line Debit Transaction

A newer and cheaper method for accepting debit cards at the point of sale is an "on-line debit transaction." In this type of sale the card must be swiped through the terminal and a PIN Pad must be installed on the terminal. Instead of signing the receipt for the transaction the customer will be prompted to enter his or her PIN number into the PIN Pad. The terminal will pass the encrypted number to the bank for verification. The merchant will then be paid for the transaction in the same manner and time frame that they would be paid on a credit card sale.

There are several advantages to accepting debit cards "on-line" using a PIN Pad.

  • Transactions process significantly less: With debit cards, as long as the customer enters their PIN number. You will not have to worry about paying expensive downgrade fees on transactions that did not qualify for the best rate.
  • Faster check out time. Most merchants do not realize how much time it takes to hand a receipt and pen back and forth over the counter. Consumers appreciate the speed of online debit transactions and feel more comfortable making smaller purchases when they do not have to worry about holding up the line.
  • Increased customer loyalty. Every consumer has their own spending habits and preferences in how they pay for products. More and more consumers are getting used to entering their PIN at the point of sale and prefer to spend their money at places that accept debit cards. These customers expect to be able to pay with their debit cards.