Did you know there can be a potentially substantial difference in costs to you, the merchant depending on how you process debit transactions? On-line is when you have the customer enter their pin # into the pinpad. Off-line is when you swipe the card as if it simply a credit card. To the customer, it doesn't matter how you run the card since they know it is simply coming out of their bank account. To you, however, the cost diffence could be significant. Let's look as some statistics.
National Averages of Debit Transactions based on Average Ticket Size
Retail Signature Debit
Ticket Range Est. % of Debit Trans
<$10.00 78.72%
$10.01-$25.00 75.55%
$25.01-$50.00 51.0%
$50.01-$100.00 40.2%
$100.01-$500.00 31.9%
$500.01-$1000.00 23.1%
>$1000.00 17.8%
Restaurant Signature Debit
Ticket Range Est. % of Debit Trans
<$9.99 83.5%
$10.00-$24.99 68.2%
$25.00-$49.99 55.16%
$50.00-$99.99 39.14%
>$100.00 26.84%
As you can see from the above chart, the larger the size of the transaction, the less likely the customer will use their debit card. They'll put larger transactions on their credit cards that pay them some form of reward and simply pay the bill at the end of the month.
Now let's look at some cost differences. For sake of this example we'll use the STAR debit network which tends to be one of the largest, nationwide. Let's say you're a retailer and your average ticket is $55.00 (nationally 40.1% of your sales will typically be debit). And, your processing rate for card present transactions is 1.59% + $.25 (an excellent rate, by the way and yours isn't likely this low). If you swipe that card for the $55 sale, your costs would be $1.12. If on the other hand, you had the customer input their pin number and it was processed thru the STAR network, your cost would be $.83. Now granted, it's only a $.29 savings but those can add up to HUGE money over the period of a year.
Post any questions or comments that you have here and I'll help you figure it out.
Thanks for reading
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3 comments:
that's a lot of debit card processing information! informative post! thanks!
Thank you for your informative site. We own a full-service restaurant and I have been told that it would be inefficient to try to utilize wireless debit pen pads table-side. In addition, I understand that the pin pads create a problem with leaving a tip on the debit card. Can you explain to me why wireless debit pin pads creates these problems when used table-side for payment? Is there any way to circumvent these issues so that we can get a reduced rate for our debit transactions? 45% of our customers pay with Visa debit. I have notice that none of the full service restaurants I frequent use pin pads...
Kathy, thanks for your question. Let’s see if I can be of help to you. I guess my first question to you is who said “it would be inefficient to try to utilize wireless debit pin pads”? Would this have been your provider or the salesperson that sold you on their services? You see, if you use pinned debit, the processor makes less off of you and conversely, you save more.
Really, the issue of leaving a tip with a debit card really doesn’t matter if you’re utilizing a wireless terminal or a wired terminal. Here’s what happens! Oftentimes, depending on the processor, when a debit is run, it will automatically “authorize” an amount from the customers checking account for 20% above the actual sale to accommodate for a typical tip. Let’s look at an example: For sake of discussion, let’s say the sale check is for $50. The authorization that hits the customers account would typically be for $60 (a 20% bump). When the server brings back the check, the customer writes in, let’s say, a 15% tip or, in this case $7.50 so their total charge would be $57.50. Well, then, the customer goes home and just happens to go on-line to their on-line banking site and sees that your restaurant charged (in their mind, overcharged) them $60.00 instead of the $57.50 that they signed for. They call you yelling and screaming saying you ripped them off. This is the only time this would really ever be an issue….that is, when the customer has immediately looked at their account on-line. Usually, the next day, or two at the most, the adjusted, real authorized amount of $57.50 would show up and the $60.00 original transaction would disappear. I hope that helps you to understand it a bit better.
With costs continuing to escalate in all types of businesses, it has been my experience that more and more merchants are looking for any way they can to save some money. Some very high end restaurants are, in fact utilizing pay-at-the-table type terminals for both the opportunity to capture pin numbers (and the resulting savings) as well as for the peace of mind of the customer since, in this way, their card never leaves their site. With ever increasing credit card fraud, this method of processing plastic in restaurants is getting more popular. Maybe you weren’t aware of this statistic but did you know that there is more credit card numbers stolen in restaurants than in any other type business?
Well, I hope all this helps. If there is anything else I can offer to be of assistance, please don’t hesitate to contact me.
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