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Online and Offline Debit Card Transactions

A lot of people ask when they set up their internet merchant account if they will be able to take debit cards as well as normal credit cards. The answer is yes.

There are 2 types of debit transactions, offline and online. Your first thought would probably be that an online debit transaction would be when you use your debit card to purchase an item on a website, and that offline would be face to face, or card present transactions. But that is actually not correct.

A debit transaction is classified online when the cardholder’s 4 digit PIN number is entered at point of sale via a PIN pad on a credit card terminal. Since it is not possible at this time to enter a PIN number on internet or other types of card not present transactions, this only applies to face to face credit card processing. By entering the 4 digit PIN the transaction is routed through the debit network vs. the Visa/MasterCard network. Since the cardholder is entering a 4 digit PIN number (only known by them) and the transaction is routed through the debit network, merchants usually pay a lower rate to process a PIN based debit transaction.

An offline debit transaction happens when a 4 digit PIN number is not entered. Since the 4 digit PIN is not being entered, the transaction is processed through the Visa/MasterCard network which means the merchant would pay the same rate they would on a normal credit card. Internet, mail/phone, and other card not present transactions are considered offline debit transactions.

Taking into consideration the merchant normally pays a lower rate when processing online debit transactions, it is critical you get a terminal that supports an external PIN pad or has one built into the keypad on the terminal. Buy a terminal with an external PIN pad. This way when a customer needs to enter their PIN number, you can just hand them the PIN pad vs. having to hand them your credit card terminal. If you take debit cards and you have a PIN pad be sure to use it. Many merchants with a PIN pad never use it. They just swipe all debit cards like a normal credit card. You are wasting money on credit card processing fees by doing this. What you should do is hand the PIN pad to everyone and let them turn it down.

Debit cards are one of the most popular forms of payment today, so if you do not take debit cards you should. And if you do take debit cards, make sure you process them correctly so you can take full advantage of the savings.



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