Home Business The Comprehensive Guide to Debit Card Processing Fees

The Comprehensive Guide to Debit Card Processing Fees

debit card

As you run a small business, you should know about the various types of fees associated with your POS system. A matter of fact. you might not even know the exact amount that your payment processor charging out of your business. 

customers around the world prefer paying through debit cards rather than cash or credit. it is recommended that you should know about the debit card processing fees. Let us help you understand all about debit card processing fees for your business.

Types of Debit Card Transactions

As a business, you will be dealing with two types of debit card transactions –PIN and signature. 

PIN Debit Transaction

When the customer enters the respective PIN or Personal Identification Number for making a debit card transaction, the merchant will not ask for the personal signature. 

PIN-based debit transactions also go by  ‘online debit transactions.’ This is because payment information gets processed with the help of the debit network rather than some processing company like Visa or MasterCard. In this case, it is the debit network that charges the overall fees out of your business.

Signature Debit Transaction

In this type of debit transaction, the customer is expected to sign the given sales receipt. The given transaction occurs when the debit card gets swiped. Moreover, the customer or the merchant will choose the processing of the card as ‘credit.’ Rather than entering the PIN. the customers are expected to sign digitally or physically.

In comparison to the PIN-based debit transactions, the signature debit transactions involve payments being routed to the respective bank through the network of MasterCard or Visa. As the processing is taking place outside the given debit network, signature-based debit transactions go by ‘offline debit transactions.’

It is important to note that even when the transactions might take place as ‘credit,’ no borrowing of funds takes place. The funds still get drawn from the checking account of the customer.

Debit Card Processing Fees

As a business, you will be paying the debit card processing fees in the form of some interchange fees. The given fees get applied when the customer will be using a debit card for making the purchase. In simpler terms, it can be said that whenever the customer will be paying through a debit card, your business will be paying some processing fees.

Usually, interchange fees are responsible for paying for the overall costs associated with fraud prevention, transaction handling, and transaction processing. These are one of the major ways in which banks tend to make money with the help of issuing payment cards. 

Debit card processing fees for businesses are affected by several factors, including:

  • Category of Merchant: The merchant code of your business depends on the specific business type & its industry. For instance, the interchange fees for gas stations tend to be distinct from that of the restaurants.
  • Card Type: Different banks issue various types of debit cards having different types of debit card processing fees.
  • Transaction Type: Processing fees depend on whether the transaction was PIN-based or signature-based.
  • Method of Processing: Processing fees take into account whether the method of payment was processed as credit or debit.
  • Bank Size: The processing fees also consider whether the bank is regulated or unregulated. 

PIN Vs. Signature-based Debit Cards

In general cases, PIN-based debit card transactions tend to feature a lower percentage fee along with a higher transaction fee. On the other hand, in case of a signature-based debit card transaction, you will observe a lower transaction fee and a higher percentage fee.

Regulated Debit Cards Vs. Unregulated Debit Cards

Whether the debit card of the issuing bank is regulated or unregulated, you will experience lower or higher processing fees for debit card transactions. A regulated debit transaction occurs when the debit card used by the user has been issued by the bank having over $10 billion in the form of assets. On the other hand, in case of unregulated debit transactions, the cards have been issued by banks having less than $10 billion in the form of assets. 

The variable interchange fees, in this case, would depend on:

  • Transaction size
  • Category code of the merchant
  • Card company

Industry-based Interchange Rates

In addition to the debit card processing fees, you will also have to pay attention to varying interchange rates that are based on the given industry. For instance, the interchange rate for a restaurant will be different from that of the hotel.

It is important to note that interchange rates tend to change over time –twice in a year in some cases. For instance, MasterCard and Visa are known to update the respective interchange fees on a semi-annual basis. 

Payment Processing Fees

There are also charges incurred upon your business by the payment processor. Payment processing organizations do not take a portion of the interchange fees. That amount goes to the respective card network and the issuing bank. Rather than this amount, the payment processing companies tend to charge a separate fee for processing the respective payments. 

The processing fees for debit card transactions that you will incur tend to vary depending on the payment processing company that you select for your business.

How to Ensure that You Get the Lowest Debit Card Processing Fees?

With multiple moving components involved in any debit card transaction, it is difficult to come up with a standard strategy to minimize the debit card processing fees. Here are some helpful tips:

  • Setting the POS for automatically prompting consumers to enter the PIN numbers
  • Choosing a network featuring favorable rates for your specific business type
  • Selecting a reliable payment processor for signature-based debit card transactions


Due to the combination of fraud protection and regulation standards, debit card transactions tend to be cheaper for merchants for processing in comparison to credit cards. 

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