The difference between credit card and debit card rates

As a merchant, you need to know there is a difference between the merchant fees of credit cards vs debit cards. In the end, credit cards are more expensive for you than debit cards. Here’s why:

  • When a customer pays with a credit card, the payment processor takes a risk by giving the merchant money and waiting to collect it from the consumer at a later date. This risk means higher cost.
  • When a customer uses a debit card (and they use a PIN to authorize), money goes from the consumer’s checking account to the merchant’s account. Since the money transfer happens immediately, there is less risk.

There is a confusing part where sometimes, particularly in USA, a consumer needs to sign for a debit transaction (no PIN). In that scenario, the rates are higher because transactions are using the credit card technology in the background. These rates used to be as high as credit card rates, but thankfully a law came in (called the Durbin Amendment) which limited debit card rates for merchants to is 0.05% + $0.21 per transaction.

Both credit cards and debit cards are big business. And, consumers will decide what is used more. In 2017, there were about 6 billion debit cards in North America and around 55% of all non-cash transactions were with a debit card. Debit card use is here and it’s big. Check payment statistics for more information.