How Does Pricing Differ Between
Signature Debit and
Online Debit?

How does DEBIT pricing differ from CREDIT pricing?

Signature debit, i.e. without a pin pad, is billed to the Merchant exactly as if the transaction was a credit card transaction. Just as with a normal credit card transaction, the Merchant will pay discount rate percentage plus per item fees. One important distinction, however, is that the discount percentage should be (but isn't always) considerably less than the percentage paid since Interchange, the wholesale cost to the processor, is much lower. However, many processors choose not to pass these substantial savings onto the Merchant and instead charge the Merchant the identical rate credit or debit.

CAUTION: Lots of processors like to quote ridiculous unrealistic low rates like 1.25% in hopes of luring unsuspecting rate-conscience Merchants to sign up with them. What they're talking about is the rate the Merchant will pay for Signature Debit which is fine and good. If the Merchant assumes...and this is the key to the scam...that this will be his rate for all transactions, he's in for a rude awakening! In reality, the Merchant will only see that number for a tiny fraction of his sales volume, and he'll end up paying dearly and then some for the rest of his business. This is the processing industry version of the old "bait and switch" ploy.

In the case of online pin based debit, the fee structure is entirely different. Instead of a percentage rate which obviously means the higher the ticket the higher the fee, pin based debit is charged one flat fee regardless of ticket amount. This fee consists of two parts:A 'switch' fee, plus the fees associated with whichever of the many national debit networks processes that particular transaction. Often, processors only quote the Switch Fee on the processing proposal in order to gain a competetive advantage over other processors who more honestly quote the switch and network fee together. The total flat fee is generally in the $.55 to $.65 cent range regardless of ticket amount, depending on geographic area and other factors.