“Credit Or Debit?” Why Your Supermarket Wants You To Pay With A Debit Card.

And this is why I love the Internet. One conversation leads to another…

Over at Gothamist, we were “talking” about tomorrow’s taxi cab strike. I had mentioned that one of the issues for the drivers is the 5% charge they will incur for all credit card charges. The conversation started to turn into how merchants are charged, and became a bit off-topic, so I decided to post my response here, rather than be rude to our hosts at Gothamist.

@“guest”
You might be correct, but in my experience (20 years retail executive and now retail consultant,) credit card processing companies no longer care as much about signatures, and take the stance that if the card is present (proven by being swiped and read), there’s no fraud. All the machines you’ve seen installed over the past few years are saving merchants thousands, even millions of dollars in credit processing fees.

Specifically, as a merchant, you want all your customers to pay with a debit card used as a debit card, which means the customer has to swipe their card and enter their PIN. This is the least expensive transaction for the merchant. If the customer wants to use the card as a credit card (“supermarket checkout: ”Credit or debit?“) it costs the merchant more.

Actual good ol’ credit cards swiped and signed (electronic terminals) cost more than the above. Swiped with no option to sign (arrangement with merchant and processing company) costs a bit less. That’s why my local drugstore only requires a signature for transactions over $75.

No swipe (for whatever reason, perhaps magnetic strip damaged, or internet purchase) with the ”salesperson/cashier“ entering your number costs more. Finally, voice authorization costs the most. Merchants are also charged for transactions that are not approved.

I could not find one site that details this, so you’ll have to trust me, but if you’re really curious, here is some more info:

Hotel Interactive
Wikipedia
Wikipedia, again
University Credit Union

Tags: credit, Debit, Gothamist