Debit Card Processing Explained - Shift Credit Card Processing

Debit Card Processing Explained

Debit card processing is a topic that often gets overlooked when it comes to payment processing. Come with us as we take an in-depth look into the ins and outs of processing debit cards.

debit card payment

Did you know that debit cards outnumber credit cards more than 5:1 in the United States? That means for every credit card in use there are 5 debit cards that have been issued. 

It’s a staggering number for most of us because when we think paying with plastic, oftentimes we think credit card first.

Number of Debit vs. Credit Cards in Use Today

At the time of this writing, there are a total of 1.06 billion credit cards in the USA, and 5.61 billion debit cards in the USA.

Why Use Debit Cards Instead Of Credit Cards?


Debit cards are far more convenient than simply carrying cash. They provide quicker purchases, with just a swipe or insertion of the card closing the sale. A single debit card represents all of the cash that’s in your bank account and keeps your money secure with a required pin for purchases.

easily track expenses

With debit cards, you no longer have to worry about keeping track of each and every purchase you make. Instead, most financial institutions have applications that store all the purchases you’ve made and allow you to look at them at any time online. 

This way, you no longer have to manually track each purchase. Instead, allow the convenience of an app to easily track each debit card purchase.

no interest

Because all of the money that you’re spending on a debit card is money that you own, rather than being borrowed, there is no interest on any of your purchases. 

This could potentially save you hundreds to thousands of dollars over time as you begin to spend more on your debit card, rather than your credit card.

stop overspending habits

With a debit card, you can only spend what is currently in your account. This keeps you from overspending and makes it harder to fall into debt. When using a credit card, it’s easy to keep spending well past your mental limit to the card’s set limit, and that can bring trouble.

no debt

With debit cards, you can only spend the money that you currently have in that financial account. This all but guarantees that you won’t find yourself spending more than you can afford to spend. 

Credit cards will let you spend up to your pre-approved amount, even if you don’t have the money to pay back each purchase. With debit cards, you don’t have the option to spend more than you can afford.


Since debit cards require a pin number to make a purchase, your money is safe in the bank while you have your debit card with you. If you lose your card, thieves can’t use your card without your pin, so your money is safe.

Debit Card and Credit Card Usage Explained

Debit cards and credit cards are different in terms of where the money comes from. With one, you’re paying with borrowed money and with the other, you’re using your money. 

When you use a credit card, you are making each purchase with borrowed money. The credit card issuing bank is using their money to pay for the purchases you put on your card and sends you a bill for your purchases at the end of the month. 

Most credit cards have a limit that you are able to spend based on your credit score and banking history.

For the business that’s accepting a credit card from you, their credit card processing fees also tend to be higher than debit card processing fees. This means that each business you pay with a credit card is losing a higher percentage of their payment when you pay with a credit card.

How Debit Card Processing Works

With debit cards, you can only spend the money that you possess in your checking or savings account. The only spending cap that you can hit is the current balance that you have in your account.

When you present your debit card as payment, the card machine checks your account balance to determine whether to proceed with the purchase. If the funds are not present, the card will be declined. If the funds are present, the transaction will be authorized and the purchase will go through.

Do Debit Cards Have Processing Fees?

There are fees for processing a debit card, but they are much less than the fees for processing a credit card. Purchases protected by a pin that’s required during the transaction have a lower interchange rate because of the lower risk of the payment offered.

Interchange rates offered to the business will vary by processor, but usually stay much more consistent and predictable than credit card interchange rates tend to be. Businesses tend to prefer that their customers pay with a debit card instead of a credit card because of the smaller fees associated with the processing of that payment method.

What Happens if I Run My Debit Card as Credit?

If you run your debit card as credit on a terminal, it will still take the funds out of your account in the exact same way as if you had run it as debit. 

So don’t be alarmed the next time you accidentally run your debit card as credit. It will take the funds out of your account just the same as any other debit card purchase.

Is it Better to Use Debit or Credit?

This, for the most part, is entirely up to the preference of you the customer. It is usually safer to use a debit card, as it will keep you from overspending past what you can pay back.

If your goal is to build up a solid credit score or garner rewards points, though, you might find credit cards to be the better option. It all depends on your own personal preference and what you decide is right for you to use.

Do Debit Card Transactions Go Through Immediately?

Debit card transactions usually go through a period where the purchase is pending before the funds are removed from your account. 

The funds will not be taken out of your account immediately. Once a debit card transaction is made and the purchase becomes pending, the funds will still technically be in your account until the transaction is finalized. 

The time that it takes for each purchase to go through can vary depending on the cost of the product, where the product was purchased, and what the product is.

What Terminal Systems Accept Debit Cards?

There are plenty of different systems and terminals used to accept debit cards, including mobile payment processing apps.

If you want to accept debit cards online, for example, you may want to look into a virtual terminal. Virtual terminals will give you access to online payment acceptance through the use of shopping cart software.

You won’t need a separate POS system to accept both credit and debit cards. Instead, one payment gateway will be able to process both forms of payments, giving you one point of sale for all card present purchase types.

How Much Does it Cost a Business to Accept Debit Cards?

In 2018, the average cost to accept a credit card was 24 cents in the USA, according to the Federal Reserve.

That number will vary, depending on some factors like the issuing bank and the debit interchange rates. 

The interchange rate will be the most likely factor in determining the cost that the business must pay per transaction. However, as a general rule, businesses are charged around 24 cents on each purchase made via a debit card.

Would a Business Rather Have Me Pay With a Debit or Credit Card?

Businesses would rather you pay with a debit card instead of a credit card. On average, businesses are charged around 24 cents for a debit card purchase. Credit card processing fees are usually much higher.

The rate that a business is charged on a credit card purchase will vary depending on the type of card in use. For instance, a common cost to accept a credit card would be somewhere around 2% of the purchase plus 10 cents per swipe. 

On a $20 purchase, for example, the cost that the business would have to pay to accept that credit card would be 50 cents. So, to accept your credit card instead of a debit card, the business would be sacrificing 26 cents, making the majority of businesses prefer to accept debit cards over credit cards.

What Are the Advantages of Debit Cards?

There are many advantages of debit cards. They make it far easier to carry money, having you simply carry a piece of plastic in your wallet rather than a bunch of different bills and coins. 

They are also a quicker payment method than cash. Other payment solutions, like cash, can take a long time to complete the transaction. Instead of pulling all of your money out, counting it, and then having the cashier make the correct amount of change, you simply swipe or insert a card and you’re done. 

Many debit cards can also be added to mobile wallets. Making a mobile payment straight from your phone is just about the fastest way to make a payment leveraging current technology.

Finally, debit cards make tracking purchases much easier and simpler than if you were to do it manually. All of your purchases are conveniently stored on your card’s mobile application or website. With debit card purchases, there is no worrying about forgetting to document a purchase or adding the numbers incorrectly. Current account technology manages your financial purchases for you so you don’t have to worry about it.

Why Would I Want to Use a Debit Card Instead of a Credit Card?

As previously mentioned, debit cards require that you spend money that you already have, keeping you accountable for the money that you spend. There are certainly still advantages to using a credit card, like building a good credit score, but with a debit card, you are sure to stay out of debt. 

Debit cards do a great job of making sure that you don’t have to deal with the inconvenience of cash, while also paying with money that you already have.

Why Do I Need to Use a Pin Number When I Pay With a Debit Card?

PIN numbers keep you safe from card theft. If your debit card didn’t require that you have a PIN number, you would be more susceptible to credit card theft. Credit card thieves need to know your PIN number before making an in-person purchase.

PIN numbers, just like credit card declined codes, are there to protect everyone involved in a credit or debit transaction. 

Some businesses, instead of a PIN number, will require that the customer sign. Signature debit is often more expensive and less secure, so it is not as highly regarded as PIN debit purchases. 

What does regulated debit mean?

The Dodd-Frank Wall Street Reform act changed the amount of fees that debit cards can be subject to. Regulated debit cards cost the accepting merchant .05% and $.21 per transaction. Unregulated debit cards are subject to 1.60% and $.05 per transaction.

What are the Advantages of Accepting Debit Cards?

  • Debit cards have a lower processing cost than credit cards
  • Customers can’t spend more than they can afford
  • Purchases are protected by PIN numbers, protecting everyone involved
  • Offer more convenience to customers that aren’t carrying cash
  • Easy to create or add to transaction history
  • Begin accepting online debit card and e-commerce purchases
  • Quicker time to approve purchases

Lower Your Debit Card Fees With Shift Processing

Ready to begin accepting card purchases at your business? Wanting to switch to a processor that puts you first?

Merchant account providers have a nasty habit of giving you an introductory processing rate and then steadily increasing your rate once they’ve locked you into a long term contract. With Shift Processing,  you process debit and credit transactions at the same rate we quote you for the life of your business. 

We work only on month-to-month contracts. This means that if you don’t like our service or our rates ever change, you can walk away at any point. If you ever decide to take your credit or debit card payment processing elsewhere, you won’t be hit with a cancellation or termination convenience fee. 

There are many credit and debit processing solutions out there, but we have set up our business so that we work to earn your business month after month. 

With free credit card terminals and our zero fee processing program, we work to completely eliminate your processing fees so that you can turn any fees you’re paying back into profit.

Leave a Comment:

Griggs Wimbley says December 27, 2022

I purchased an Electric Heater with my debit card the transaction took place immediately, unfortunately the heater was not working and I had to return it to the store. The store would not give me cash back instead they said they had to return the funds to the card. It has been 7 days and I still have not recieved my money. Why would they not give me cash back at the time of the return. It appears that that is a form of using my money for 7-10 days when they recieved it from my account immediately. How long do a debit transaction take from one institution to another.?

Bonnie Dalli says June 2, 2023

How do I cancel this account

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