As I have mentioned before, debit card usage continues to grow. In fact, debit cards were responsible or $1 trillion worth of transactions last year, which is the first time these type of cards have enjoyed this much activity.
The reason for retailers preferring the PIN method is quite simple – it’s faster and requires less paperwork. Banks, on the other hand prefer that their debit card holders sign their receipts. In fact, they so strongly prefer this method that many charge a fee of anywhere from 25 cents to $1 for those that enter a PIN rather than signing a receipt.
The reason for this preference all comes down to money for the banks. Simply put, they can charge a higher fee to merchants when they process signed payments as opposed to transactions completed with a PIN.
The jury is still out on customer preference. There are, however, a few key differences in how the transaction is actually completed whether it’s signing a receipt or inputting a PIN number. Namely, when you use your PIN to make a purchase, the money is removed from your account immediately. If you pay with a signed receipt, on the other hand, it can take a few days before the money is cleared from your account.
For me, it just seems easier to pay with a credit card and forget about these hassles. By paying off the balance at the end of the month, you aren’t digging yourself a debt. In addition, you don’t have to worry about overdraft fees or insufficient fund fees that you can incur by paying with debit cards. According to the Center for Responsible Lending based in Washington, D.C. customers pay about $17.5 billion in overdraft fees each year, with approximately half of those fees being directly linked to ATM withdrawals and debit card transactions.
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