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Why Processing Debit Can Be Confusing.

This week I’m responding to a question from Bill in our Facebook community. If you’re not part of our private Facebook group for merchant salespeople, not executives, you really should join. We have almost 1,000 members and lots of engagement. Look for CCSalesPro […]


This week I’m responding to a question from Bill in our Facebook community. 

If you’re not part of our private Facebook group for merchant salespeople, not executives, you really should join.  We have almost 1,000 members and lots of engagement.  Look for CCSalesPro Community.  We’re the top group in the industry by a good bit, so it’ll pop right up.

Lots of Confusion

My interactions with people in the industry confirm there’s still a lot of confusion concerning pin debit versus signature debit and the Durbin Amendment.  Hopefully, this episode will help unravel the confusion.

Here’s Bill’s request:

 “Please review the following statement and comment on its accuracy.  Under the Durbin Amendment there is no distinction between using a pin or not.  If the card is a bank debit card, it is always considered a debit transaction with or without a pin number – never considered a credit sale.”

Bill, that IS an accurate statement.  However, I’d like to point out a few caveats.  Many questions about debit come from the confusing terminology in our industry.

Key Information

> Understand the Durbin Amendment doesn’t apply to all debit transactions.

> From a broad perspective, there are two types of transactions:  debit and credit.

  1. Debit

In debit transactions, money is debited from an account where cash exists.  Prepay transactions also fall under this category.  Money is debited from an account containing a cash amount.

  1. Credit

In credit transactions, consumers spend money they don’t have.  They are leveraging credit.

> There are two different ways to use debit cards.

#1.  Entering a pin number 

Transactions with a pin number do not use the Visa / MasterCard networks.  These use an entirely different set of networks, such as Star, Pulse, NYCE, and Accel. 

Although Visa and MasterCard own several of these networks, the rules governing them is different from those of the card networks.

One big difference is there are no chargebacks on pin transactions. 

#2.  Signature debit

These transactions do use the card networks.  Rather than entering a pin number, consumers sign.

Cost of Processing

There is a huge amount of confusion concerning the cost of processing debit transactions.  Whereas there was previously a big difference in cost, the Durbin Amendment leveled the field.

The Durbin Amendment capped the cost.  The issuing bank can’t collect more than 5 basis points and $0.22 per debit transaction.  Regardless of the networks used, the underlying cost is basically the same.

> Pin debit networks (Star, Pulse, NYCE, Accel, etc.) set the debit network access fees.  They determine the amount paid to issuing banks to run pin debit transactions which don’t use the card brand networks.

> The card networks set interchange rates.  They determine the amount paid to issuing banks to run signature debit transactions which use the Visa / MasterCard networks.

> The Durbin Amendment only applies to banks with $10 billion or more in assets.  Although that sounds monstrous, it’s not THAT big.  The only banks without that much assets are the local or regional ones.

> The smaller banks still process unregulated debit.  These DO still have interchange or debit network access fees.

In my last study, 85% of all debit transactions were regulated.  This means they came through banks with $10 billion or more in assets.  So, only about 15% are unregulated debit.

Key Terms

> Regulated debit versus unregulated debit transactions

Regulated debit transactions fall under the Durbin Amendment.  Unregulated debit comes through an issuing bank with less than $10 billion in assets and is not under the Durbin Amendment.

> Online debit versus offline debit

Online signifies pin debit and goes over the debit networks.  Offline debit is signature debit.

Debit cap means it’s regulated.  If you see Visa debit or MasterCard debit, that’s obviously signature debit since it’s using the card networks.

> I realize this is a lot of “heavy” information.  Perhaps you might listen to or read this episode more than once to soak it in.  And I hope you get some helpful tips!


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