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Debit card payments: PIN or signature?


Debit cards are rapidly gaining popularity.  Consumers who in the past were unable to pay with plastic now can get approved for a standard bank-issued debt card or a prepaid debit card to use as an alternative to cash. 

Unlike a credit card, a standard bank-issued debit card authorizes a merchant to take money directly from your checking account. 

When paying with a debit card, there are two options.  You can either swipe your card through a reader and enter a personal identification number (PIN), or you can sign a receipt without entering a PIN. Regardless of your selection, the payment is taken directly from your account.

Still, some experts recommend that debit card users opt for the "credit" selection. Here are three reasons:

  • You avoid paying transaction fees. A few banks charge from $0.10 to $2 each time you use your PIN, but there are generally no such fees for signature transactions.
  • You could earn rewards. Some debit cards offered by major issuers provide points toward rewards.  Most of these programs, however, only let you earn points for signature debits, or provide more points for signatures than PINs.  Regardless, you earn very little when the programs are free, with enrollment costing $20 to $60 annually for rewards programs that rival those of credit cards.  At that rate, it takes a lot of debit card payments in order to break even.
  • You may experience greater security.  Visa and MasterCard offer "zero liability" if someone uses a stolen debit card to drain your account.  But some banks only provide this protection for signature debits, so you should find out if PIN debits are also protected.    

Published: August 31, 2006

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