Updated May 17, 2024

Debit Card Processing Fees

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Debit card processing fees are less expensive than credit card fees. But there's a lot more to learn about them than that. Read on.

Debit card processing can be cheaper than credit card processing—as long as you consider the right factors.

The types of debit card transactions, caps from banks, and processor markups all play a role in its overall cost.

This article will serve as a guide to help you understand what to expect. You'll also learn about the best processors that won't break your bank. Read on.

What is Debit Card Processing?

Debit card processing enables you to accept debit card payments from your customers. Customers typically use checking or savings accounts connected to a debit card to make these payments.

It's less risky compared to processing credit cards. This is because you're taking money directly from customers' bank accounts—money that is their own, unlike with credit where customers borrow the money.

You'll need a debit card processing company to process these payments. They are merchant account providers or payment services providers that also process credit card payments.

There are laws involved with debit card processing. You're not allowed to surcharge, and there's a maximum cap of fees you can be charged with. But more on that later.

Keep in mind that not all debit card transactions are the same. Keep scrolling for your options.

What are the Different Types of Debit Transactions?

When accepting debit card payments, you can process them as PIN debit or signature debit transactions.

PIN Debit Transactions

PIN (Personal Identification Number) debit is the most common type of debit card processing. It's also known as an online debit card transaction.

It needs to be authorized using the customer's PIN, so it's typically more secure than signature debit. Plus, because of real-time authorization, you'll know right away if the customer has sufficient funds in their account.

Payments are processed through debit card networks such as Accel, NYCE, and Star. This is unlike credit card processing which uses credit card networks such as Mastercard and Visa.

Contactless debit transactions work like PIN transactions. Customers will "tap" their debit cards to make payments. But they no longer need to enter their PIN, leading to faster checkouts.

Signature Debit Transactions

As the name suggests, signature debit transactions require customers to sign receipts for their purchases. You can set thresholds (i.e., $25) for signatures. Customers won't be required to sign the receipts if they purchase less than this amount.

Signature debit is also called an offline debit card transaction. These transactions are "run as credit" since they're processed through credit card networks. They're simply marked as debit payments.

That said, be mindful of the "authorization hold."[1] Signature debit has no "real-time" authorization. This means you won't even know if the customer has enough money in their account.

Card-not-present transactions work like signature debit transactions. They're processed through credit card networks. And they're used for eCommerce, card-on-file, and keyed-in payments.

It's not just the transactions that come in 2 types, however. There are also two types of banks affecting debit card fees. Read on.

Do Debit Cards Have Processing Fees?

Unfortunately, there are fees for processing debit card payments. Fees differ if a bank is a regulated bank or an unregulated bank.

Why are you charged debit card fees?
Multiple services are involved every time you take debit card payments. The customer's bank (issuing bank), credit and debit card networks, and payment processors play a role. And they charge for their services through interchange, assessment, and markup fees.

Fees from Regulated Banks or Exempt Banks

The Durbin Amendment regulates banks with assets of $10 billion or more. For these banks, the debit card interchange fees are capped at $0.21 + 0.05% times the transaction value. There may also be an additional $0.01 for fraud protection.[2]

This cap applies to both PIN and signature debit transactions.

Fees from Unregulated or Non-exempt Banks

Unregulated banks, in turn, are those with less than $10 billion in assets. Although they're not regulated with said fees, some debit networks still cap the maximum fee.

Large interest groups or industries can negotiate with debit networks for caps on these fees. You can check if your industry belongs to such an agreement.

How much are debit card processing fees?

The average debit card processing fee per transaction is $0.38 for signature debit transactions and $0.25 for PIN debit transactions. The average for all networks is $0.34 per transaction.[3]

To help paint a better picture, here are some of the debit card interchange rates from VISA[4] and Mastercard:[5]

VISA Interchange Rates

Card Present TransactionsExempt Check Card TransactionsRegulated Check Card Transactions
Retail0.80% + $0.15 per transaction0.05% + $0.21 per transaction
Small ticket items1.55% + $0.04 per transaction0.05% + $0.2 per transaction
Restaurant1.19% + $0.10 per transaction0.05% + $0.21 per transaction
Retail Key Entry1.65% + $0.15 per transaction0.05% + $0.21 per transaction
Card Not Present TransactionsExempt Check Card TransactionsRegulated Check Card Transactions
Electronic Interchange
Reimbursement Fee (EIRF)
1.75% + $0.20 per transaction0.05% + $0.21 per transaction
Standard Interchange
Reimbursement Fee
1.90% + $0.25 per transaction0.05% + $0.21 per transaction
Business Debit FeesExempt Business DebitRegulated Business Debit
Business Debit,
Card Present
1.70% + $0.10 per transaction0.05% + $0.21 per transaction
Business Debit,
Card Not Present
2.45% + $0.10 per transaction0.05% + $0.21 per transaction
Business Utility Program,
Recurring Bill Payment
$0.75 per transaction0.05% +$0.21 per transaction
Business Utility Program,
Card Not Present Only
$1.50 per transaction0.05% + $0.21 per transaction

Mastercard Interchange Rates

Unregulated Consumer Debit RatesDebit Rate
Restaurant1.19% + 0.10 per transaction
Service Industries1.15% + 0.05 per transaction
Payment Transactions0.19% + 0.53 per transaction
Regulated Commercial Debit RatesDebit Rate
Regulated POS Debit0.05% + 0.21 per transaction
Regulated POS Debit with Fraud Adjustment0.05% + 0.22 per transaction
Payment Transaction0.19% + 0.53 per transaction
PIN Debit RatesDebit Rate
PIN Debit Payment Transaction0.19% + 0.53 per transaction
PIN Regulated POS Debit0.05% + 0.21 per transaction
PIN Regulated POS Debit with Fraud Adjustment0.05% + 0.22 per transaction
PIN Debit All Other Base0.90% + 0.15 per transaction

That said, interchange fees aren't the only fees to consider. Other fees depend on your payment processor or merchant account provider. You may be charged annual fees, monthly fees, PCI-compliance and non-compliance fees, etc.

Can businesses charge a fee for paying with a debit card?
Charging customers a fee or "surcharge" for using debit cards isn't allowed. The card networks, like Mastercard[6] and VISA[7], prohibit them. It's also against the law.[8] But because of the cap on interchange fees, accepting debit card payments can be lighter on the budget than credit cards.

Now that you know the fees, here's what really happens behind the scenes as you process these payments.

What is the Process of Payment with a Debit Card?

Whether you're accepting a signature or PIN debit, here's how the process works:

  1. The customer dips/swipes the debit card on your terminal.
  2. The payment processor sends the debit card information to the processing network. The network verifies the data and checks for fraud.
  3. The info is forwarded to the customer's bank (issuing bank). This issuing bank confirms if there are sufficient funds to make the payment.
  4. This info is relayed to the processor. If the payment is approved, payment will be withdrawn from the customer's bank account to your merchant account.
  5. After 1-2 days, your provider will transfer the funds to your business bank account (minus the fees).

You can use one processor for processing credit and debit card payments. So, what's the difference between the two?

What is the Difference Between Debit Card and Credit Card Processing?

While debit transactions can be processed through debit or credit card networks, credit card payments are processed through credit card networks alone.

Here's a side-by-side comparison of their differences:

Credit Card ProcessingDebit Card Processing
Riskier since customers are borrowing moneyLess risky since customers use money that they already have
Customers can reap rewards depending on the type of their cardCustomers receive limited rewards compared to credit cards
Higher cap on feesLower cap on fees
Can have surchargesNo surcharges allowed

Debit Card vs. Credit Card Fees

Debit CardsCredit Cards
Maximum cap on fees$0.21 + 0.05%[9]3% Visa;[10] 4% Mastercard[11]
Average processing fees$0.34 or 0.73% of the average transaction value[9]1.5% - 3.5%[12]
Pricing model
Depends on your payment processor
Depends on your payment processor

Credit card processing fees tend to be costlier than debit card fees. You should consult with payment processors to find out exactly how much you're expected to pay.

Interchange-plus pricing is the most transparent pricing model. You'll see exactly how much the interchange rate, card brand, and processor markup fees are.

But you may be offered other pricing models, including subscription, flat rate, and tiered pricing.

If the fees are too expensive, keep reading for ways to lower them.

How to Lower Debit Card Processing Fees

Debit card fees can still pile up. This is especially true if most of your customers use debit cards for payments.

Here's what you can do about it:

  • Use PIN debit if you sell pricier products.
    PIN debit transactions typically have higher per-transaction fees and lower percentage fees. This makes them more suitable for large-ticket items. If you're selling cheaper products, it'll be more expensive for you as a merchant.

  • Use signature debit if you sell affordable products.
    On the other hand, signature debit transactions often have lower per-transaction fees with higher percentage fees. It's doable if you sell small-ticket items.

  • Consult with your processor about debit routing.
    A customer's debit card can be processed in various debit networks. Consult your payment processor about how many debit networks they work with. Then ask about how their dynamic routing works.

    Ideally, each debit card payment will be processed with the least expensive debit network (in terms of interchange fees).

  • Negotiate other fees set by your processor.
    Interchange fees set by card networks are typically non-negotiable. But fees set by your debit card processor aren't. You may be able to negotiate monthly fees, minimum volume fees, compliance fees, etc.

  • Ask your processor for interchange-plus pricing.
    Interchange-plus pricing is the most transparent and can be the most affordable pricing model.

    Some interchange-plus processors don't even charge monthly fees, so your account is free. It can be the ideal pricing model, especially if you're a quickly growing business.

After learning all about debit card processing, you can get started on searching for the right processor below.

Best Debit Card Processing Companies

The best debit card processors are also the top credit card processing companies. This list highlights those that can offer you interchange-plus pricing.

Helcim: For Quickly Growing Businesses

Helcim is one of the best merchant account providers offering debit card processing. You'll be offered interchange-plus pricing, so you'll know exactly how much you're paying for interchange rates, card brand fees, and processor markup.

Your account is also free, so you won't need to worry about monthly fees. The best part, however? The higher your sales volume, the lower the rates. So it's most suitable for growing businesses.

Helcim also offers a smart terminal and a card reader so you can take payments in person. This makes it convenient for brick-and-mortar stores that don't have their own processing equipment yet.

Dharma Merchant Services: For B2B Businesses

Dharma Merchant Services is another merchant account provider that offers interchange-plus pricing. Your rates will vary depending on your industry. Some supported industries include retail, restaurants, and B2B businesses.

Unlike Helcim, however, Dharma charges monthly fees. If you're a B2B business, your merchant account will cost $15/mo. But what makes Dharma suitable for your industry is its expertise and the tools it offers.

Dharma is also very transparent with their fees. You can even get reduced rates if you process $100,000/mo.

PaymentCloud: For High-Risk Businesses

PaymentCloud is one of the best high-risk merchant account providers. You get customized payment solutions depending on what your business needs. Plus, a dedicated account manager will be there in case you have concerns.

PaymentCloud offers customized pricing, so you won't know your rates until you reach out to them. On the plus side, this can provide more room to negotiate your fees.

As a high-risk business, you may want to expect higher rates than usual. But PaymentCloud can be a good choice since it supports chargebacks of up to less than 3%. Traditional merchant accounts can flag your business if you reach just 1%.

Stax: For Large Enterprises

Stax is a merchant account provider that offers membership pricing, hence it's best for larger businesses. Monthly fees cost $99 to $199/mo, which can be expensive for small or new businesses.

That said, you'll only be paying the direct cost of interchange rates per transaction. This means you can say goodbye to processor markups that can make processing fees pricier.

Similar to other processors on this list, you can accept payments in person, online, and manually with Stax. Apart from debit cards, you can also accept other payment methods such as credit cards, ACH, and contactless payments.

What the Experts Say

CreditDonkey asked a panel of industry experts to answer readers' most pressing questions. Here's what they said:

The Bottom Line

Debit card processing lets you accept debit card payments from your customers—which can be significantly cheaper than processing credit card payments.

That said, there are many factors that affect the debit card fees. How much you end up paying will depend on the type of debit card transaction, interchange fees, and processor markup.

Also, the process of accepting debit card payments works similarly to accepting credit card payments. It boils down to choosing the right processor to make the work easier for you.

References

  1. ^ Direct Financial. Debit Card Holds, Retrieved 02/21/2024
  2. ^ Federal Trade Commission. New Rules on Electronic Payments Lower Costs for Retailers, Retrieved 02/21/2024
  3. ^ Federal Reserve System. Debit Card Interchange Fees and Routing, Retrieved 02/22/2024
  4. ^ VISA. Interchange Reimbursement Fees, Retrieved 02/15/24
  5. ^ Mastercard. Merchant Rates, Retrieved 02/15/24
  6. ^ Mastercard. Merchant Surcharge FAQ, Retrieved 02/21/2024
  7. ^ Visa. Surcharging Credit Cards–Q&A for Merchants, Retrieved 02/21/2024
  8. ^ GSA SmartPay. Smart Bulletin, Retrieved 02/21/2024
  9. ^ Federal Reserve System. Debit Card Interchange Fees and Routing, Retrieved 02/21/2024
  10. ^ Visa. Merchant Surcharge Q and A, Retrieved 02/21/2024
  11. ^ Mastercard. Merchant Surcharge FAQ, Retrieved 02/21/2024
  12. ^ CreditDonkey. Credit Card Processing Fees, Retrieved 02/21/2024

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