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Accepting Debit Cards

terminalsforfree
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Accepting Debit Cards
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There is a lot of confusion amoungst merchants about accepting debit cards. This article will go over the most cost effective way to accept debit cards. First you need to know the terminology used with Debit Cards. There are two different ways to accept a Debit Card, Online or Offline. An Online Debit Transaction is when you swipe a debit card and have the customer enter their PIN Number into a PIN Pad. An offline Debit Transaction is when you accpet a debit card, instead of entering the PIN Number you run it just like you would run a normal credit card. So, when should you go Online vs. Offline? The anwser to this depends on the size of the transaction. Let me explain.... When you have a customer enter their PIN Number that transaction is no longer running on the Visa/ MasterCard Network, it is running on a Debit Network. There are 10 different debit networks that transactions will run on (the back of the customers card will have the logo of one of the 10 networks on it).

1. Accel

2. AFFN

3. Alaska Option

4. Credit Union 24

5. Interlink

6. Maestro

7. NYCE

8. Pulse (Money Station & Tyme)

9. Shazam

10. STAR (Cash Station, MAC, & Honor)

Each one of these networks has a different formula for calculating their fee for the transaction but they all cap at a certian point. The cheapest network is $0.12 cents. The most expensive network caps at $0.68 cents. That is the actual cost charged to the processor for that transaction and then the processor will add an additional transaction fee above that (usually $0.20 to $0.40 cents). The average debit transaction will cost you about $0.55 cents. So, you want to get the PIN number when it would cost more than $0.55 cents to run the transaction as a Visa/ MasterCard Credit transaction. Let me give a couple examples: First, let's assume you are paying around 1.7% for your credit card transactions and around $0.20 cents per transaction for your credit card transactions and that your average Online Debit Transationc (PIN entered debit) is $0.55 cents.

Example #1

If you were to run a $10.00 Offline Debit Transaction (NO PIN entered) you would pay the 1.71%, which equals $0.18 cents plus the $0.20 cent transaction fee for a total of $0.38 cents. Running it as an Online Debit Transaction (entering the PIN number) on the same $10.00 transaction will (on average) cost you $0.55 cents, so you are better off NOT entering the PIN number.

Example #2

If you were to run a $20.00 Offline Debit Transaction (NO PIN entered) you would pay the 1.71%, which equals $0.36 cents plus the $0.20 cent transaction fee for a total of $0.56 cents. Running it as an Online Debit Transaction (entering the PIN number) on that same $20.00 transaction will (on average) cost you $0.55 cents so it will cost you virtually the same running it Online or Offline.

Example #3

If you were to run a $100.00 Offline Debit Transaction (NO PIN entered) you would pay the 1.71%, which equals $1.71 plus the $0.20 cent transaction fee for a total of $1.91. Running it as an Online Debit Transaction (entering the PIN Number) on that same $100.00 transaction will (on average) cost you $0.55 cents, so you save $1.36 running it as an Online Debit Transaction and having the customer enter their PIN number.

Example #4

If you were to run a $1000.00 Offline Debit Transaction (NO Pin entered) you would pay the 1.71%, which equals $17.10 plus the $0.20 cent transaction fee for a total of $17.30 cents. Running it as an Online Debit Transaction (entering the PIN number) on that same $1000.00 transaction will (on average) cost you $0.55 cents, so you save $16.75 running it as an Online Debit Transaction and having the customer enter their PIN number

Hopefully these 4 examples help you understand when it is best to run the card as an Online Debit Transaction (PIN Entered) or an Offline Debit Transaction (NO PIN entered). The general rule of thumb we tell our customers is anything under $25.00 run as a credit card (Offline Debit) and anything over $25.00 try and encourage your customers to enter their PIN Number (Online Debit). Following this rule of thumb you will maximize the amount of profit you make on all your debit transactions.

 

 

 

 

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