Debit Dilemma: Sign or Not to Sign?

Debit card holders may not realize it, but there is some dough on the line every time you swipe your card. And a lot of it depends on whether or not you “sign” after you swipe. What’s the better deal for consumers?

First, you can’t blame consumers for being in the dark on this issue. Signing or not signing a debit card receipt, to most people, seems like a random event. But there are some decent studies on customer preference when it comes to debit card usage.

According to Hitachi Consulting, signature and PIN debit payments account for 37% of all U.S. store transactions. The Hitachi study estimates that PIN debit payments are preferred by 45% of customers surveyed, while 35% prefer signing off on their card purchases, The study points out that PIN debit fans view the procedure consider as more secure, faster and easier to use than signing off on a debit card payment. Debit card holders who favor signatures see it their own way — they say they like the security, lack of fees, not having to remember a PIN and the rewards benefits of signature transactions.

Card carriers have their own preferences, too. To sign or not to sign is certainly a big issue to the banks and credit card companies behind your debit card. For example, most big chain stores pay banks and card carriers 75 cents for every $100 spent by consumers on debit card purchases that require a signature. That’s about twice the amount charged to retailers if you simply tap in your four-digit card code at the register.

So it’s clearly in the interest of a Visa (Stock Quote: V) or Mastercard (Stock Quote: MA) to have you sign off on your card purchase.

Conversely, retailers don’t want you to sign the cards (to avoid the extra fees) — that’s why big chain stores like Costco (Stock Quote: COST) and Wal-Mart (Stock Quote: WMT) insist that you use your PIN to check out your store purchases.

It seems like card carriers and banks have retailers over a barrel. By flooding the market with debit cards, financial institutions are giving the Great American Consumer what he or she wants — the convenience of paying a purchase with plastic instead of having to dig into a wallet or pocketbook for cash and correct change.

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