In Processing, What’s the Real Difference Between Credit and Debit Cards?

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Your customers are likely to use both credit and debit cards when they make a purchase from you, and while these two payment vehicles look like the same thing, they’re actually quite different when it comes to processing. For the customer, the biggest difference is simply the source of funds. Credit cards are borrowed money while debit cards take money directly from an account to pay the merchant. For stores like yours, though, the difference runs much deeper.

Where They’re Processed

The difference between payment process solutions for both cards begins from the moment the customer presses credit or debit on the PIN pad. If they choose to press credit, it will be processed through a credit card network, like Visa or MasterCard. The details go through your payment processor to the network, then on to the issuer to get the signal of acceptance. Then the decision backtracks to your point of sale. Credit card processing sounds complex, but it happens in just a few moments.

Debit card processing, though, requires a PIN to complete the transaction. Once that is entered, it moves through an entirely different network. Star and Interlink are two of the biggest. Then approval is given or denied, and the decision works its way back to you.

The Cost

The physical space in which these two cards are processed isn’t the only big difference. The fees can vary, too. You pay an interchange fee on every debit or credit card transaction you handle. The fee, though, can vary by the type of card. If you’re running a card not present transaction, you’re likely to pay the same fee for either a credit or a debit card. If you’re handling an in-person sale, though, the interchange fees on debit cards are often less than they are on credit cards.

No matter what type of card your customers are using, understanding how the process works is key to getting you the rates and perks you deserve from your processing equipment.

Contact Y2Payments today at 888-693-1850 to learn how we can help provide you with a superior payment system.

The Difference Between Credit Card and Debit Processing

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Most merchants can process both credit and debit cards. The two work very differently, though, for both the customer and the merchant. For the customer, those differences are obvious. The source of the funds on a credit card is an account the consumer holds with that company. It’s often an agreement to borrow money from that company and pay it back. A debit card, though, gets its funds from a bank account. From a processing perspective, that difference is less obvious.

Credit Card Processing

When a customer chooses to use a credit card to make a purchase at your store, the processing takes place through the major digital networks of each credit card company. The payment processor sends the details to a credit card network like Visa or MasterCard, then the card’s issuer accepts or declines the transaction. Naturally, the entire process takes only a matter of seconds. Interchange fees on a credit card transaction tend to be higher than those on a debit card, and those fees increase with web or mobile credit card transactions.

Debit Card Processing

When a customer swipes a debit card, the data can go through Visa or MasterCard, but it can also go through other options like Interlink, STAR Network, or Maestro, just to name a few. That data is then forwarded to the issuing bank, and then the transaction is either approved or denied. Debit cards have a unique set of regulations that govern payments. Processing costs are lower, but the amount depends on whether the card is regulated or unregulated. It may also depend on the total amount of the transaction. Additionally, the smaller the bank, the more likely a PIN or signature will be required, which can affect the fee structure.

 

What works for your company will depend a bit on the differences between payment processing solutions and what forms of payment your company currently accepts. Search around to find the best payment processor not just for you, but for your customers as well.

Contact Y2Payments today at 888-693-1850 to learn how we can help provide you with a superior payment system.