“Credit or debit?” As a savvy business owner, which answer would you prefer to hear? Does their answer impact your bottom line? Which method costs you more?

If a customer uses their debit card and then selects “credit,” what does this mean for you? How do processing fees change the way you do business? In other words, which costs more for you, the merchant: credit or debit?

In order to see the whole picture and develop an informed opinion, we’ll examine the decision making process from two different perspectives: yours and your customer’s. 


Credit vs. Debit Transactions for the Customer

For the consumer, it’s mostly a matter of personal preference when choosing to process their card as debit or credit. Some things they may take into consideration are fees that may be encountered on their end, such as backend banking paperwork fees. Certain banking institutions charge their customers a fixed fee (generally $0.25-$0.60) for each transaction they run as debit due to the extra work incurred on behalf of that bank. These fees will appear on the customer’s bank statement, much like an ATM convenience fee or surcharge would.

Aside from focusing on bank fees when choosing debit over credit, many of your customers will like the idea of accountability attached to paying with their debit cards. They don’t receive a monthly bill, there’s no penalty interest rate on their checking account and they may find it’s easier to “live within their means” due to the fact that they’re not borrowing against themselves only to pay off debt later. For those people, as a merchant, you should always offer the option of PIN-based debit card acceptance so as not to miss out on potential sales.

Processing Debit vs. Credit as the Merchant

As a business currently accepting credit and debit card payments, you must already have a merchant account with your payment processor. Each processor will have different criterion of how debit card payments are handled. For some, you will find that there is no direct percentage rate schedule attached to debit processing and only a fixed transaction fee (generally $0.25-$0.50) per transaction. However, even though your processor may not charge you a percentage per debit transaction, you should be aware of the various debit card networks (STAR, NYCE, Pulse, etc.) that may.

In order to decipher if this is happening, you’ll be able to tell what that fee is, if indeed there was one, when you receive your first processing statement. This fee is referred to as a “network access fee” which is paid to the network of banks affiliated with your customer’s debit card issuing bank (Fifth Third, Bank of America, TCF, etc.).

Generally speaking, PIN-based debit card transactions will end up being cheaper for your business in the long run. When a PIN-based debit card transaction takes place, instead of traveling through the payment networks required to process a transaction as credit, the transaction, along with the customer-entered PIN number, travels directly to the customer’s bank account. That account is checked for availability of funds and, if there’s enough to cover the requested payment, the account is immediately debited and the funds are scheduled for deposit into your business’s bank account within 24-48 hours.


Once again, the answer to the question of, “which costs more for merchants, credit or debit?” remains somewhat open-ended. As it stands now, the answer hinges upon how your processing is set up with your merchant account provider and what types of debit cards you encounter. Generally, PIN-based debit transactions will tend to cost merchants less than transactions run as credit.

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