by Ben Dwyer Contrary to popular belief, PIN debit transactions incur more than just a flat fee, often making signature debit transactions cheaper to process. Understanding the ins and outs of debit card transaction fees will ensure you’re not losing hard-earned money pennies at a time.
Unnecessarily high debit card transaction fees are an easily correctable source of significant losses for many businesses. Understanding debit card transaction fees and the difference between signature debit and pin debit transactions will save your business thousands in processing fees.
Feel free to jump down to the Signature Debit Vs Pin Debit Cost section if you’d rather skip the details and get right into which type of transaction is cheapest for your business.
- Signature Debit
- Pin Debit
- Durbin Amendment
- Signature Debit Vs Pin Debit Cost: What’s Best for Your Business
Signature Debit
A signature debit transaction is where a customer uses their debit card to pay for a product or service without entering their personal identification number (PIN) into a PIN pad. Instead, they complete the transaction by signing the sales receipt as if they used a credit card to make the purchase.
Since a customer does not enter a PIN, the signature debit transaction is routed to the bank via Visa or Mastercard’s computer network instead of the PIN debit network, making the transaction subject to Visa and Mastercard interchange fees instead of the PIN debit network fees.
Note: Signature debit transactions are often referred to as an offline debit transaction because a PIN debit network does not play a role in processing the transaction. Additionally, signatures are not always required, so the name can be a little confusing.
Debit Interchange
A business pays an interchange fee to a customer’s issuing bank each time it processes a signature debit transaction through Visa or Mastercard’s network. The amount of the interchange fee varies depending on the size of the bank that issued the customer’s card, the amount of the transaction, and whether the transaction is card-present or card-not-present.
Since both signature and PIN debit transactions must be card-present by nature, this article does not touch upon card-not-present debit interchange fees.
Debit Interchange & Ticket Size
Card-present (swiped) debit interchange fees differ on a per-transaction basis depending on the size of a transaction. Transactions that are less than $15 are classified as small ticket, whereas transactions that are $15 or more are classified simply as retail debit.
Current Visa and Mastercard debit interchange fees are listed below, but interchange fees change often, and it’s best to check Visa and Mastercard for the latest fee schedule.
Visa Debit Interchange Fees
Small Ticket Debit (Less than $15): 1.55% plus $0.04
Retail Debit ($15 or more): 0.80% plus $0.15
MasterCard Debit Interchange Fees
(MasterCard refers to swiped transactions as merit III transactions as shown below.)
Merit III Small Ticket Debit (Less than $15): 1.55% plus $0.04
Merit III Debit ($15 or more): 1.05% plus $0.15
As our article on credit card transaction fees discusses in detail, the card brands have structured debit interchange fees this way because the transaction fee portion of credit card processing fees has a greater impact than the rate portion for businesses with a low average sale amount.
Processing Markup: Rate & Fee
As with all credit and debit card transactions, the interchange fee paid to the issuing bank is only one portion of expense; the processor needs to make money, too. The sum of interchange, assessments, and the processor’s markup determines the fee a business pays to process a signature debit transaction.
As we’ve covered in detail in CardFellow’s free Credit Card Processing Guide, the pricing model a processor uses to assess charges has a greater impact on cost than its rates and fees.
Tiered Pricing Cost
In the case of tiered pricing a business does not pay interchange fees. Instead, a business pays qualified, mid-qualified and non-qualified rates to a processor, and the processor pays interchange fees on the business’s behalf. (Note: In recent years, Visa has begun calling some of its downgrades “non-qualified.” As such that term alone is not an automatic indicator of tiered pricing.)
Calculating signature debit fees on tiered pricing is a simple matter of multiplying the processor’s rate by the amount of the transaction, and then adding the processor’s transaction fee. Keep in mind that processors will often have separate pricing tiers for credit and debit card transactions.
A very expensive issue with tiered pricing is that it does not allow a business to reap the benefits of small ticket interchange fees.
For example, a business with an average ticket of $12 that is being billed on tiered pricing with rates of 1.69% plus $0.25 will pay $0.44 (0.0169 * $12 + $.25) to process an average signature debit transaction.
However, the processor’s cost for the transaction at the small ticket debit interchange rate is only $0.23 (0.0155 * 12 + $0.04).
Interchange Plus Cost
For businesses savvy enough to pay processing fees via interchange plus pricing, calculating signature debit cost is a simple matter of multiplying the processor’s rate by the transaction amount, adding the processor’s transaction fee, and then adding the cost of interchange.
For example, a business with an average ticket of $12 that is being billed on interchange plus with rates of 0.25% plus $0.10 will pay a markup to the processor of $0.13 (0.0025 * $12 + $.10) to process an average signature debit transaction.
Add the processor’s markup of $0.13 to the interchange cost of $0.23 (0.0155 * $12 + $.04), and the total signature debit cost is $0.36.
PIN Debit
A PIN debit transaction is one where a customer pays for product or service by entering their personal identification number (PIN) into a PIN pad to complete a transaction. In the case of a PIN debit transaction, the customer does not sign the sales receipt.
Information for a PIN debit transaction is routed from the merchant to the customer’s bank by a PIN debit network, therefore subjecting the transaction to the debit network’s fees.
Side Note: PIN debit transactions are often referred to as an online debit transaction because a PIN debit network handles the routing of transaction information instead of Visa or Mastercard.
PIN Debit Network Transaction Fees
Debit networks such as NYCE, STAR and ACCEL maintain computer networks to route transaction information among businesses and banks. A debit network charges an interchange fee and a switch fee to route transaction information over its network.
Contrary to popular belief, PIN debit transactions incur more than just a flat fee.
Debit networks charge a fee that consists of a percentage, a flat transaction fee, a switch fee, and an annual fee. In fact, debit network fees are very similar in structure and complexity to the interchange fees charged by Visa and Mastercard.
Debit network fees vary by merchant category code, transaction size, and a few other less common variables. Some debit networks cap the maximum fee that a business pays, while many have no cap.
The networks’ fee category for general PIN debit transactions is listed below along with a maximum fee, if any, but keep in mind that PIN debit fees change often. Check with your processor or acquirer for the most recent information.
Unregulated PIN Debit Network Fees
The fees in the table below are apply to transaction that do not fall under the Durbin Amendment cap.
All transactions that do fall under the Durbin cap carry a rate of 0.05% and a transaction fee of $0.21 (plus an additional $0.01 for transaction that meet fraud criteria).
| Network | Rate | Transaction Fee | Switch Fee | Maximum Fee | Annual Fee |
|---|---|---|---|---|---|
| ACCEL | 0.9% | $0.225 | $0.04 | None | $12 |
| AFFN | 0.75% | $0.12 | $0.035 | $0.90 | None |
| Interlink | 0.8% | $0.15 | $0.035 | None | None |
| Maestro | 0.9% | $0.15 | $0.025 | None | None |
| JEANIE | 0.75% | $0.14 | $0.055 | None | $12 |
| NYCE | 0.75% | $0.13 | $0.0425 | None | $14 |
| Pulse | 0.80% | $0.15 | $0.075 | None | $12 |
| Shazam | 0.85% | $0.15 | $0.06 | None | None |
| Star | 0.90% | 0.195 | 0.0625 | None | $12 |
Processing Markup: PIN Debit Fee
Similar to signature debit transactions, a business pays a debit network fee as well as a markup to the processor to process a PIN debit transaction. However, a processor’s markup for a PIN debit transaction often consists of only a single flat fee called a PIN debit fee. However, processors are able to add a volume markup (rate) to PIN debit volume.
For example, a business with an average ticket of $12 and a PIN debit fee of $0.18 will pay a markup to the processor of $0.18 to process an average PIN debit transaction. In this example, the processor does not charge a percentage of the transaction, just a flat transaction fee.
However, the same business will also have to pay an interchange fee to the debit network that processes its transaction. Let’s assume that the STAR debit network processes the majority of the business’s transactions.
STAR’s interchange and switch fee results in a charge of $0.42 (.009 * $25 + $0.0625), that when added to the processor’s markup brings the total fee to $0.60 ($0.18 pin debit fee + $0.42 debit network fee).
If you scroll up and look at the cost example for signature debit transactions, you’ll see that PIN debit is actually more expensive for this business than signature debit due to its low average sale amount.
Durbin Amendment
Effective October 1, 2011, the Durbin Amendment capped the debit interchange fee that can be charged by any bank with $10 billion or more in assets. That means that large banks (those with $10 billion or more in assets) can only charge 0.05% + 21 cents per transaction. This is sometimes referred to as regulated debit.
The Durbin Amendment transformed the payment landscape overnight, and had a profound impact on debit card transaction fees. Please check out this article for more information about the Durbin Amendment.
Signature Debit Vs Pin Debit Cost
When people want to know the difference between signature and PIN debit transactions, they usually want to know which type of transaction costs less to process. The answer is different for every business, but it only requires a quick bit of simple math to figure out.
The first step toward figuring out which type of transaction is cheapest for your business is determining the pricing model that your processor is using to assess fees. If you don’t already know, a quick look at our article about tiered pricing vs. interchange plus will help you figure out which type of pricing your processor is using. If you would like more detail, check out the articles that cover tiered pricing and interchange plus separately.
Interchange Plus Pricing
If your processor is charging fees based on interchange plus pricing, read through CardFellow’s PIN debit vs. signature debit cost article to figure out which type of transaction is cheapest for your business.
Tiered Pricing
The first step to comparing signature debit vs. pin debit transaction fees on tiered pricing is to calculate your signature debit cost using your business’s average sale amount as we did in the Interchange Plus Pricing Cost section above.
Once you know the signature debit cost, calculate the PIN debit interchange cost using your business’s average sale amount and average debit network fees of 0.834% plus $0.197 per transaction.
For example, if your business’s average sale amount is $20, the PIN debit interchange charge will average $0.36 (.00834 * $20 + $0.197).
Add your processor’s PIN debit fee to the PIN debit interchange cost to arrive at the final total. For example, if your processor’s PIN debit fee is $0.18 and PIN debit interchange is $0.36, the total PIN debit cost for your business’s average sale is $0.54.
Finally, compare the PIN debit cost to the signature debit cost for your business to see which is lower, and there’s your answer!
I am a bit confused about your comments about V/M debit interchange Vs. Durbin debit interchange.
I thought all regulated debits are now 0.05%+$0.22/23. Where is 1.55%+$0.04/0.80%+$0.15 from?
Thanks!
Hi Wesley,
Regulated debit card will incur an interchange or PIN debit network charge of 0.05% plus a $0.22 transaction fee. Issuers that meet certain fraud deterrent standards can charge an extra $0.01, making the transaction fee $0.22. The 1.55% plus $0.04 and 0.80% plus $0.15 are interchange charges associated with unregulated (issuing institutions with $10 billion or less in assets) offline (meaning non-PIN) debit transactions.
I have a question regarding use of my debit card at the US post office. I buy a $1000 money order monthly to pay my rent, based on PIN network debit charge of 0.05% plus .22 (1000 * .005 = 5), is my understanding correct that the USPS pays a fee of $5.22 to the bank which means it ‘eats’ the loss of $3.62 for high value money orders they sell?
0.05% of $1,000 is $0.50, not $5. (0.05% as a decimal for multiplying is 0.0005.)
They’re paying $0.72 base costs if it’s a regulated debit card, but there are additional fees (like assessments and processor markup.)
Thanks for this explanation that makes a lot of sense to me now.
Is it normal for our merchant services to charge a flat fee per transaction plus the interchange fee on debit transactions?
Hi Jack,
There is no “normal” when it comes to how processors charge. If it’s PIN debit, they might charge a flat per-transaction fee, a per-transaction fee plus a percentage markup, or other options. (But if it’s PIN debit, there is no interchange. PIN debit transactions go through the PIN debit networks.) If it’s signature debit, interchange plus a flat per-transaction fee with no volume markup is a payment model used by companies like Payment Depot. It’s a method that’s becoming popular, but it’s certainly not the only way to charge.
Without knowing a little more, it’s hard to give detailed info for your specific situation.
What is this zero fee solutions all about? They say we charge our customer 3.99% on top of whatever they buy from us at the restaurant and we don’t pay any fees except what they charge us in a lease of $140.00 per month for 5 years.
Hi Joan,
Zero fee processing is a surcharge pricing model – they’ll charge your customers the fees instead of you. 3.99% is a pretty steep fee to add on, so you’ll want to consider whether that will be offputting to your customers. (Customers will need to be informed of the fee prior to purchasing, and it must be a separate line item on their bill/receipt.) Surcharging is prohibited in several states, so you’ll need to make sure the surcharge processing company can operate in your state.
Additionally, you will still have processing costs for debit cards (even if run “as credit.”) A lease of $140/month for 5 years is pretty steep for equipment, too.
We have an article about no fee processing, here: https://www.cardfellow.com/blog/free-credit-card-processing/
If you’re paying too much for processing currently, one option would be to see if you really have competitive pricing. You can use a tool like the CardFellow quote comparison to see what pricing you’d be eligible for from leading processors. It’s free and private. Try it here: https://www.cardfellow.com/sign-up
I’m new to this and a little confused. Here’s my company info: Our average ticket is $82. We currently accept PIN debit, but a processor was in telling us that it is unnecessary to get the debit rates. Based on our average ticket of $82, is this correct?
I’m not sure what part the salesman was saying is unnecessary? PIN debit will typically be cheaper than signature debit for larger transactions, as yours are.
Please update your PIN Debit Network fees table. There have been several changes since this was published! Thanks and great work!
Hi Tina,
Thanks for the heads up! We try to keep the fees updated, but sometimes miss a few. We’ll take a look and make any updates needed.
I couldn’t access the pin vs signature calculator. The page doesn’t have it anywhere. Did you take it down?
Hi Lane,
The calculator is not accessible at this time. I apologize for the inconvenience!
The interlink rate is wrong.
I appreciate the info! We’d be happy to make an update if you can provide an official source. We’re working off of Visa’s Interlink table as posted on its website (https://usa.visa.com/dam/VCOM/download/merchants/interlink-interchange-reimbursement-fees.pdf) but if there’s a more recent one, we’ll certainly include that information.
Thanks for reading!
– Ellen from CardFellow
Thanks for your information. As a typical consumer, I was very perplexed when the owner of a small men’s clothing store wanted to charge me 4% of my total bill, to use my debit card. Your education here, answers many questions I had about this issue. After reading the info here, I’ve decided 4% is fairly steep. Needless to say, I did not make that transaction. I want to shop local, but tactics like this are making it hard to do. Thanks again.