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Why Debit Cards and Credit Cards Have Different Processing Rates

When accepting payments via debit and credit cards, one will notice that providers often charge different rates. The reason for this is not always known to the average entrepreneur. However, there are a few reasons why this is the case. With this in mind, here are three reasons why debit cards and credit cards have different processing rates.

Fraud: First and foremost, when accepting payments in multiple forms, it’s likely that a business owner will deal with plenty of fraud. Think about it, the minute a person steals a credit card, he or she is likely to run to a store or online retailer. Then, they are likely to use it to buy goods or services. On the other hand, with a debit card, one must use a pin, which is harder to steal. For this reason, credit card processing is often more expensive a merchant account providers need to worry about fraud with credit cards.

Technology: Without a doubt, when looking at the technology to accept payments via credit and debit cards, one will be in amazement. While true, because of ant-fraud measures, among other things, credit card process is costlier to the business owner. Then, when this happens, many store owners will pass the cost onto local consumers. Either way, with merchant accounts, one will pay a higher fee when dealing with credit cards.

The market speaks: Finally, most business owners prefer to take credit cards for a variety of reasons. Not only do credit card buyers spend more money, they are likely to come into the store or head online. On the other hand, people use debit cards out of convenience, when they are not carrying any substantial amount of cash. For this reason, stores will often get charged a higher rate to take credit cards. Remember, in the free market system, a credit card payment processing company can charge high rates if consumers demand the services. On the other hand, debit cards are used for low-end transactions, which don’t bring in as much revenue. The net effect is, people are not willing to pay high fees to accept debit.

When looking at merchant accounts, it’s obvious that it’s more expensive to accept credit cards. Though, the reasons are simple and make sense to a person who doesn’t mind delving a little deeper into this important subject. In the end, it’s wise to accept both payment forms.


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