In the debit card market, there are two primary means by which transactions are completed when customers charge on a debit card with either the card holder’s signature or with a personal identification number, or PIN. While these two cards are still considered debit card accounts and function identically to the debit card user, in reality there are some significant differences that could ultimately affect how the users can employ their cards. Below is a list of the major differences between a signature-based debit card and a PIN-based debit card.
- Fees. From the merchant’s point of view, the biggest difference between a signature-based debit card and a PIN-based one is the fee that they pay to the credit card companies for their respective uses. In other words, merchants pay almost twice as much money in fees to the credit card companies when a signature-based debit card is used than when a PIN-based one is employed. The low cost of the PIN-based transaction is centred mostly around the convenience and the short time that the purchase amount is downloaded from the debit card account. With a PIN-based transaction, the debit card account is authorised to release the funds immediately, but more time is involved with a signature-based debit card charge, making it more similar to a standard purchase credit card transaction.
- Security. While advances in technology have made virtually all debit card transactions safe and secure, there is still a difference between signature-based debit cards and PIN-based cards that makes signature-based ones slightly safer. If a thief has intercepted a debit card user’s PIN code in addition to their debit card, then they can enjoy free reign with the debit card since they will be able to finalise the transactions by entering the personal identification number. With a signature-based debit card, however, the thief may be asked to furnish identification to compare with the debit card, a process that will hinder them from completing the charge. These exceptions apply almost exclusively to in-person debit card purchases. Online purchases or transactions over the phone carry equal risk, since most of the time a PIN will not be requested and a signature cannot be obtained.
- Acceptability. One key difference in the fees that are levied on signature-based debit cards is how this translates into the acceptability of a given user’s debit card. Many merchants, not wanting to pay the higher fees for a signature-based card, will accept only PIN-based debit card transactions. This should not be a problem for the majority of debit card users since many debit card accounts are set up with a personal identification code at their inception. However, for those debit card users who are not assigned a PIN code or have not set one up, they may find that their card cannot be used at merchants who have outlawed them in order to save money.
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