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Advantages of Reward Checking Accounts That Count PIN-Based Debit Card Purchases


Advantages of Reward Checking Accounts That Count PIN-Based Debit Card Purchases

One provision of the financial reform bill (that's likely to become law this week) gives retailers the right to impose a $10 minimum purchase requirement for credit cards. Also, retailers will be allowed to give discounts for paying cash instead of credit. These provisions may also affect debit card purchases. However, it's possible that PIN-based debit card purchases may be excluded.

The fees that retailers pay for PIN-based debit card purchases are much less than credit-based debit card purchases. Here's one example given by Clark Howard:

If you go for credit, the merchant will pay $1.50 in processing fees. If you opt for debit, the merchant may only pay 17 or 18 cents.

So if retailers start implementing these changes for credit card purchases but not PIN-based debit card purchases, it will be important for us to identify reward checking accounts that allow PIN-based debit card purchases to be counted toward the debit card usage requirements.

Many banks and credit unions allow both signature-based (credit) debit card purchases and PIN-based purchases to count. This includes the two nationwide reward checking leaders, Danversbank and ViewPoint Bank. Allowing both types of transactions appears to be most common. However, there are a few that only count signature-based purchases. One recent example is TransPecos Bank (see review). In my reviews of reward checking accounts, I have tried to note if the debit card purchases have to be signature-based.

It is nice to see many banks counting both types of transactions. My guess is that most people just use the credit option since you don't have to remember your PIN, and that's why banks allow both.

There are a few institutions that actually punish customers for making PIN-based debit card purchases. One example is GTE Federal Credit Union which charges customers 25 cents for every debit transaction made using the PIN (see review).

Anonymous   |     |   Comment #1
I am not sure it's a good idea to use a PIN with POS transactions. Hidden cameras, shoulder surfing, a more sophisticated skimmer and boom $24999 is gone. Also, PIN-based transactions do not enjoy the fraud protections offered by Mastercard or Visa, only the usually more limited set of protections specified by the bank in compliance with Regulation E. 
Anonymous   |     |   Comment #2
There's also an issue for people who live or travel abroad. In the country where I live in Asia, I've never yet seen any option for doing PIN based transactions with a VISA or MC logo debit card. Most regular shops, stores and restaurants and such accept VISA or MC logo debit cards here, but they're always and only handled as credit card transactions (signature based). Since living here, I've also never yet seen a "cash back" option as something that could be added onto purchases, as was easy to do at many grocery stores and such in the U.S. If any of my RCA accounts had requirements for making PIN based transactions, I'd be in real trouble.

Anonymous   |     |   Comment #3
Just the protection consumers needed: more fees!

Higher minimum purchases really help struggling consumers, thanks Congress.
Greg Patrick
Greg Patrick   |     |   Comment #4
To Anonymous that posted on Monday, July 19, 2010 - 8:40 AM.

Each county has a different way to handle debit cards.  The U.S. debit card provided the U.S. merchant has the correct point of sale terminal can take pin transactions.  A lot of merchants here in the U.S. take pin transactions. 

Those restrictions only apply to the transactions made within the U.S.  There are some exclusions to these new rules.  Federal Benefit, State Benefit, prepaid, gift, and EBT (Food stamp) debit cards.  Don't know if the rules technically applies to debit card pin transactions.  Those transactions are actually considered atm transactions.  The banks may start encouraging pin use.
Anonymous   |     |   Comment #5
Keep in mind that just because merchants CAN implement a $10 minimum does not mean all merchants WILL do so. I would expect larger merchants, such as Walmart, major grocery store chains, Starbucks, etc. not to do so because they have relatively better arrangements with their credit card processors AND because the negative impact to their business is likely offset by the increased sales volume.

On the other hand, I am sure many/most smaller merchants will implement the minimum - but again I don't see it as a huge deal as many of these already have a posted or unstated minimum in violation of their agreement with Visa/MC. So all the financial reform bill does is make this practice, which is already WIDELY in place, legal.
Anonymous   |     |   Comment #7
Credit card expenses are directly deductible from merchants income tax dues. No big deal for them, instead paying the profits in taxes, they will deduct them directly

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