Standing at the checkout counter, you are ready to swipe your bank debit card for a purchase and the clerk asks if you prefer credit or debit and you think "Uh, what the heck is the difference? The money is coming out of my account either way." Well, as it turns out, there IS a difference. One more way that credit card companies get you. We all know that retailers pay a percentage of a sale every time a credit card is used, but what is the story with debit cards?
In the 1980s, retailers did not pay a percentage of sales to banks when customers paid with a debit card, as a matter of fact they sometimes received kick-backs from banks because it saved the banks money on processing paper checks. As time went on, debit cards became more popular and are now poised to overtake cash purchases by 2012. Each purchase has the potential to make Visa and your bank more money, with their hands in our pockets.
Read this interesting article in the NY Times, it breaks down the various fees and explains who makes what on each transaction. Yes, it looks like they are actually getting the businesses, but at the end of the day, that cost hits the consumer through higher prices. From interchange fees alone, each family pays an estimated $427 a year factored into the prices of everything from gas to groceries.
The short answer is that the banks (especially Visa) make less money if you punch in your pin code, versus the signature method. Who knows how long this will last and what shady fees will be instituted next, but that is how it stands today. Cash is still king, but if you don't carry green, at least opt for debit and punch in your pin. The bank-sters have taken enough already.
NY Times Credit and Debit Cards Article