Plastic Or Plastic? - credit card industry - Brief Article

Kiplinger's Personal Finance Magazine, Oct, 2001

SHOPPING | Why card issuers want you to sign a slip rather than use your PIN when you buy with a DEBIT CARD.

IT'S BECOMING harder to tell a debit card from a credit card. Many of the cash cards now impose spending limits, charge annual fees and offer air miles for purchases. And card issuers are encouraging you to sign a paper authorizing form rather than punching in your PIN.

Chase and U.S. Bank have begun rewarding customers with one airline mile for every $2 in debitcard purchases. Charter One, a Cleveland-based bank, bestows points that can be exchanged for airfare or other rewards. (As with credit cards, you'll pay a $15 to $30 annual fee to carry a debit card that awards mileage.) Visa and MasterCard also waive the $50 liability for unauthorized purchases with stolen debit cards, just as they do for the credit variety.

But most of these perks apply only if you treat the debit card as a credit card. As long as your plastic is emblazoned with a Visa or MasterCard logo, you can tell the merchant--either orally or by pressing a "credit card" key--that it's a credit card. Why steer cardholders toward old-fashioned paper transactions rather than newfangled PINs? Because big bucks are involved for the issuer.

When you use your debit as a credit card and sign for a purchase, the funds are taken out of your checking account, but the transaction is processed through the credit card network. That means the card issuer gets a bigger fee (out of the merchant's pocket) than with a PIN transaction. A few issuers are even starting to charge debit-card holders a nickel or dime fee for every PIN transaction as another way to encourage them to choose the signature method.