Pin Debit vs. Signature Debit: Which is Cheaper?

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People often prefer debit cards over credit cards because debit won’t land them in excessive debt, and there are no monthly payments of which they need to be aware. Cardholders can put a limit on their debit cards, just like their credit card. When using a debit or credit card, it’s crucial to match it to a need or a goal. 

However, there’s still one essential question to answer, and that is deciding which debit card is more secure – a pin or a signature-based card? EMC2 Billing can provide insight to help businesses lower costs from each debit or credit card transaction. Here’s our guide to pin versus signature-based cards.

Related: High Risk Payment Processing

What is a pin debit?

A pin debit transaction is where the customer has to enter their personal identification number to complete the purchase on their debit card. There’s a subsequent charge for the transaction, which is determined through the debit network.  The debit network fee is made up of a flat transaction fee (0.05%), percentage, annual fee, and switch fee.

All the above fees are known as interchange fees, which is the merchant’s bank account that pays the card-issuing bank when the customer makes a purchase using their debit card. These fees cover any risks, bad debt, fraud, and handling costs incurred during the approval of the payment. Keep in mind that the interchange fees are not static.

What is a signature debit?

The signature debit transaction allows the customer to complete the transaction by putting in their signature instead of their PIN. This type of transaction runs the card as a credit even though it’s still debit. That is because the signature debit transactions go through the credit networks and not the debit networks. Because of this, they are referred to as offline transactions.

This transaction is subject to the three processes in the credit network: interchange, processor markup, and assessment. The interchange fees in the credit network are nonnegotiable and are unfixed. With some debit cards, they can be less than one percent, and on others, they can be as high as 3%.

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Which one is cheaper?

There is no “one size fits all” answer to this because the interchange fees vary from one card to another, and it also depends on the type of transaction. However, organizations that have large average transactions will find pin-based transactions more affordable to process. On the other hand, small businesses typically have lower than average transactions and find signature transactions to be a cheaper option.

Signature debit offers lower transaction fees, but they have higher percentage fees while pin debit has higher transaction fees and low percentage fees. 

Related: Merchant Cash Advance

Factors affecting cost 

a bunch of $100 bills flying around

The cost of debit transactions is affected by several factors, such as:

Regulated and Unregulated Debit Card

A regulated debit card is obtained from a bank that has more than $10 million in assets, while unregulated debit means that the bank issuing the debit card has assets worth less than $10 million. According to the Durbin amendment, regulated debt has a fixed cap of 0.05%. The card issuers who have less than $10 million have not been regulated on how much they can charge to move funds during transactions. That means they can charge what they choose.

It can be challenging to tell which cards are regulated and which ones aren’t. Keep in mind that with a regulated card, a smaller transaction will equal a higher cost of interchangeability. Therefore, a regulated debit card makes sense for higher transactions.

The Durbin amendment allows the regulated card issuing bank to have an additional $0.21 in transaction fees.

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Network pricing

Network pricing drives the cost of the card because each network has its specific pricing for all the transactions.  Signature transactions that run through credit card interchanges come with pricing for the fee program. This process is referred to as the merchant’s business type as well as the interchange rate, which is like a visa card or the rate for the regulated card. The regulated card will have 0.05% plus the $0.21. The unregulated/exempt card will have an interchange rate of 0.80% plus $0.15.

For pin debit, the transactions are the same as the ones in the signature transaction. However, the interchange rate for exempt cards is 1.00% plus $0.04, while the regulated debit transaction remains 0.05% plus $0.21. Remember that pin transaction also comes with a switch fee, which is typically between $0.03 and $0.08 depending on the network and the merchant.

Ticket size

The rule of thumb is that the higher the business transactions, the lower the effective cost. This rule applies to both pin and signature debit. With that in mind, the signature debit is a cheaper option on all the other networks.

Because the pin debit transaction has a fixed transaction fee of 0.05%, any pin debit transaction (even one where the customer spends as little as $20) will result in high transaction fees to the card-issuing bank from the merchant. This is manageable for larger organizations that have higher transactions, totaling thousands of dollars and higher profit margins. 

The same scenario for a small business could be crippling in the long run, especially when opting for the signature transaction that can be as low as $0.23, therefore, retaining a lot more of the transaction as part of the profits. The merchant also has to pay processing markup fees, which are a flat rate for pin transactions but vary for signature transactions.

Related: Terminated Merchant File


Debit transactions offer merchants better protection from chargebacks, as they have a more rigorous process compared to credit cards. It’s especially tricky to get chargebacks approved by the bank on transactions that were completed using a PIN. Chargebacks are expensive on the merchant, and they can also damage a business’s reputation. Some platforms refuse to work with a vendor with too many chargebacks.

However, because of the intensive chargeback process on debit cards, customers prefer to approach the merchant directly for a refund. This saves both parties a lot of trouble and costs.

Other considerations

spoon balancing on a calculator with coins and potatoe

It’s always advisable to have an audit of the debit transactions and systems to ensure that the business is enjoying some cost-effective transactions. A review of the amount of regulated volume and how much you’re spending on processing both regulated and unregulated debit will reveal areas that need improvements. Be sure to specify during the audit that the processor should show debit rates for both pin and signature transactions.

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The biggest takeaway when comparing pin and signature debit is that no one can ever be complacent and believe either choice is the only one applicable to their business. Learning more about pin and signature debit will help businesses manage their transaction and extend their saving correctly. Sometimes cardholders may need to incorporate both types of debit to reap the rewards and benefits that they deserve.

At EMC2 Billing, we provide services that can guide high-risk business owners to decide the type of debit card they should use and ways to lower transactions. In the industry for several years, we have helped a lot of business owners reduce transaction costs. Check out EMC2 Billing to talk to a merchant expert today.

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