When to Consider Pin Debit vs Credit Card Transactions!

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When to Consider Pin Debit vs Credit Card Transactions featured image

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What is the difference between credit card and pin debit card transactions?

Let’s start with credit cards. The credit is linked to the cardholder’s creditworthiness by the card issuing bank. The merchant is offering credit to their customers. If a card is declined at the point of sale, the creditworthiness is ZERO. Do not accept a declined credit card, no matter what the custom tells you. It is no good. The liability is with the merchant, who should perform due diligence on whether the card is legit and belongs to the person who says they are the cardholder. The merchant can ask to see a driver’s license to verify the purchaser is who he says he is.

The credit card issuers favor the cardholder and give them 6 months to issue a chargeback. In the case of a chargeback, the money is immediately reversed from the merchant back to the cardholder. It is up to the merchant to prove that the cardholder did indeed purchase the product for the amount transacted to get his money back. The merchant can provide a signed copy of a receipt to prove the customer did indeed purchase the product. Let’s compare this to transaction amounts from Pin debit cards. The funds are immediately withdrawn from the cardholder’s bank account and deposited into the merchant’s bank account in the nightly batch. They cannot be charged back. They are as good as cash if they are approved at the point of sale by the terminal. If the customer doesn’t have enough funds in their bank account, then it is the bank’s liability to retrieve that money from the cardholder. The merchant has been paid, period.

Debit cards that are processed as a credit card, without a PIN are the same as a credit card and they can be charged back. The merchant carries the liability. Merchants who run large transactions may want to take pin debit cards to protect themselves against large chargebacks that can hurt their cash flow. Merchants who take large transactions over the phone or the internet need to be even more careful. They can verify the address on the cardholder’s account. They can even ask the cardholder to sign a contract or an invoice scanned to them and verify the signatures.

Liquor stores and pawn shops like to require pin debit card transactions because they are in an industry that sees a lot of chargebacks from credit cards. Jewelry stores and camera stores have to worry about theft or fraud from credit cards transactions more often than other retailers with smaller tickets. They may want to use pin debit transactions for those large purchases from new customers with whom they are not familiar. The cannabis industry is not allowed to take payments with credit cards. Pin debit is a perfect solution, but obviously, the cardholder has to be present to capture the PIN.

Contact us to get started in pin debit at Contact Electronic Money Company – Albuquerque Merchant Service

Electronic money company is honest, upfront. We shower our customers with white glove service and support. We also never raise rates on any of our customers. Our goal is to keep our merchants for the life of their business.

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