Firstly understand that a debit transaction should be about half the cost of a credit card transaction. If you own a business and someone comes in and pays with their debit card, the only reason why you’re not kissing them is because cash is even cheaper.
Do they actually even make cash anymore?
Let me make sure that is clear: A debit card should cost your business half of what a customer with a credit card costs, and no that doesn’t mean they have to use their PIN number either. Straight out of the wallet a debit card is cheaper. Loads cheaper. So if you are a retail organization where your customers are physically in front of you with their card, what rates are you paying. On a non rewards credit card, you’re probably paying about 1.64% and $0.18 per transaction to accept that card as payment. However, a debit card should be about 0.84% and $0.32 per transaction. A little higher on the per trans fee, but at most businesses, that doesn’t throw off the scale.
Recently a business I consult for was looking at possibly changing their provider and wanted me to review their numbers. They had a good rate of 1.61% on their credit cards and 0.83% on their debit. The new provider was going to give them 1.60% That is a change of one Basis Point in our industry (or more accurately would save them 1/100th of a percent). In other words: nothing. What’s worse is they didn’t see the shell game the new provider was playing. The proposed new rate would be 1.60% for everything. Credit and debit cards alike. So they would have saved 0.01% on credit cards and paid a premium of 0.76% for their debit cards over what they were paying currently.
To make matters worse, this business took in 90% debit cards. Effectively their rate would have doubled had they moved forward. This is because something really good came out of the Durbin Ammendment as a total accident: The rate of debit cards effectively dropped to the level of the PIN being entered in whether it was or not. This means less hassel for the business to get the better rate of a debit card, but that assumes of course that their merchant account gives them the better rate for the debit card.
The short answer: Debit’s about half. Make sure yours is.