Credit vs. Debit

The question has long been, “credit or debit?” when a customer presents their bankcard to you, the merchant. You’re giving the customer the choice, and, often the reply is simply, “oh, whatever.”

You shouldn’t be as casual about it. It helps to understand the difference between credit and debit card transactions.

There are different ways to look at this. We’d like to outline two for you, which yield a similar result as far as answering, “what’s better for you (the business)?”

The first is this:

The transaction fees between a customer using credit vs. debit are generally more expensive from the “credit” side of the equation. Card networks charge a number of different fees for both credit and debit transactions – some of the fees are based on the value of the sale and other fees are the same for all transactions, regardless of the sale amount.  As we noted, debit transactions generally cost your business less and debit transactions where the customer enters their PIN usually cost you the least, unless the sale is less than around $15.

The second:

Chargebacks. As a merchant, you dread a chargeback. It’s a lose-lose situation. You lose out on funds you had acquired, and, you lose out on the product that walked out the door, possibly never to return. So, you’re stuck holding an empty bag for which you may have paid a premium. Obviously, this is not good for the bottom-line and business longevity.

You can minimize chargebacks from a bank card perspective by getting your customers to enter their PIN. If they’re entering their PIN, the transaction is much more sound than generating a signature on the credit end of the transaction. It’s much easier for someone to find (or steal) a card and forge a signature than it is for them to figure out the PIN number.

So there you have it. In a nutshell, this is how you can save your business in interchange fees and peace of mind:

  • Debit transactions save you money due to lower incurred fees;
  • Debit transactions are far more secure than their counterpart.

If you don’t have a PIN pad today, contact us to help you get set up – and steer your customers to enter their PIN, steering more profit into your business’s bank account.

Have questions in regards to what your payment transactions mean to your business health? Please contact us to discuss ways you can save money, and increase security through the use of your payment processing platform. At Thrive Payments, we have the knowledge, secure card payment equipment, and support you need.