DEBIT CARDS: PIN USE VERSUS SIGNATURES

Here are a few facts regarding debit cards from The Wall Street Journal:

• According to Visa, a typical supermarket pays 24 cents in fees when a customer buys $40 in groceries with a debit card using a PIN.
• The same $40 purchased with a debit card using a signature costs the supermarket 35 cents in fees.
• If the customer uses a credit card to make the same $40 purchase, the supermarket may pay more than 50 cents in fees.
  
• Electronic payments (debit and credit transactions) surpassed the use of cash and checks for the first time in 2003.
• Nearly 67% of the 6.2 billion transactions processed by Visa in the three months ended September 30 were debit card transactions.

What does this mean for businesses?

1. Consumers prefer to make electronic payments, so nearly all businesses must offer this option.
2. Fees for debit PIN transactions are lowest, so nearly all businesses should have a PIN touch pad. Currently there are about six million merchant locations that accept credit and debit card payment, but only about two million have the pad technology in place to allow for PIN transactions.
3. To strongly encourage debit PIN transactions, payment terminals that scan cards should automatically default to PIN for scanned debit cards.
   

To most consumers, the difference between PIN and signature transactions is merely one of preference and convenience. To businesses, it is a serious bottom-line consideration. That is why J.C. Penney, Sears, and Sonic, among others, are in the process of installing new systems to encourage the less expensive debit PIN transactions.