Rebate Incentives for Using Debit as Credit Cards Kicks Merchants in the Cash Drawer

When it comes to paying with plastic, what consumers hand over to merchants can make a big difference both to buyer and seller.

Debbie Marinaro of Noblesville estimates she uses her credit card about 95 percent of the time when she makes purchases.

“I would use credit more than debit for those expenses that I would let roll over to the end of the month,” she said. “But I use my debit card for when I want to pay ‘cash’ – like a check and want it to come directly from my account.”

Marinaro said she never uses her debit card as a charge card, but many people do, to the chagrin of merchants who pay higher fees to process debit cards as charge transactions.

Sue Roudebush of the Old Picket Fence shop in Noblesville said about 75 percent of “plastic” transactions are processed as credit, rather than debit.

“If they (purchasers) run it as a charge and it’s over $25 it costs less for me as a retailer,” she said. “If it’s a debit card and it’s over $25, then it’s a lot less for me – sometimes a percentage, percentage-and-a-half.”

But Roudebush said if it’s a debit card transaction under $25 the retailer has to pay more.

“This is so confusing,” she said. “It’s like 55 cents per transaction on a $10 debit card versus a $10 credit card … it only costs me like 1.5 percent.”

Tammy Daubenspeck of Eleanor Rozella’s said more than half the purchases at her store are credit transactions.

“I think some banks will tell the customers that if they use their debit card as a credit they can get a refund,” she said. “I know myself, when I use my debit card and I punch it in as credit, I get back so much rebate every month in my checking account using it that way instead of using it as a debit.” - The use of credit/debit cards for purchasing everything from gas to groceries has grown steadily in popularity, however, some confusion remains as to the best choice to make when making financial decisions. Photo by Robert HerringtonSome credit card companies may even offer purchase protection on consumers goods to customers who use their debit cards as credit cards that they might not otherwise have with a debit card purchase should something go wrong after the sale. VISA media relations did not return a request for clarification on the benefits and disadvantages of requesting merchants transact debit cards at the higher-fee credit purchases. But merchants agree, even if customers hand over plastic cards to pay for purchases costing under a dollar, retailers have to offer the charge card service to stay in business.

“So many more people are using their debit cards rather than writing the old-fashioned checks, which is really good for us, because you’re pretty much guaranteed a payment,” Daubenspeck said. “Unless someone charges, let’s say, $5. That’s almost practically giving it away by the time you pay your fees and everything. It’s so much better to pay cash.”

Chuck Crow, president of Community Bank, agrees. He advises paying for purchases with cash and forgoing making credit purchases as much as possible.

Debit cards make it much easier to pay directly from a checking account without writing a check. But Crow said paying with a debit card can be risky if someone steals your card and your personal identification number (PIN).

“If you use your debit card, you have to enter that PIN,” he said. “If somebody stole your debit card and used just your card, they could clean out your checking account. Maybe there’s a consumer advantage for it, but most of the large retailers want to know what it is because of that difference in the processing rate, and that’s usually why they ask you, ‘Is this a debit card or credit card transaction?’”

Crow also advises keeping careful track of how many purchases you make with your debit card. Even though you can process a debit card as a credit transaction, it is not a credit purchase. Keep the amount you spend written down in the check register so you don’t come home from shopping to find a costly surprise.

“If you’re not disciplined, then all of a sudden all of the money in your checking account is gone and you wonder where it is,” he said. “And if you don’t keep all those charge slips, then you have to wait until you get your statement or you go online to look up your statement and see if there’s a charge to the local grocery store or drugstore, or whatever it is. So it requires some discipline.”

By Rebecca L. Sandlin

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