Debit vs. credit processing costs: same swipe, different price

Debit cards usually cost less to accept than credit cards, because debit interchange is generally lower, especially on debit cards from large banks, where federal rules cap it. Credit cards, and rewards and business credit cards in particular, carry higher interchange because the issuing bank takes on credit risk and funds the perks.

The gap in debit vs. credit processing costs is real, but whether you benefit from it depends on how your processor prices your account.

Why debit and credit cost different amounts

Most of your processing cost is interchange, the fee paid to the bank that issued the card. Interchange is set by card type, and debit and credit sit in very different places:

• Debit pulls money straight from the customer’s bank account. The bank isn’t lending money, so its risk is lower.
• Credit is a short-term loan from the issuing bank. The bank carries the risk until the customer pays the bill, and interchange helps cover that.
• Rewards and premium credit cards carry higher interchange, which helps fund points, miles and perks.
• Business, corporate and purchasing cards often carry higher interchange still, though sending Level 2 or Level 3 data can lower it on qualifying B2B sales.

Regulated and exempt debit

Debit isn’t one category either. The Durbin Amendment caps interchange on debit cards issued by large banks. Those are called regulated debit cards, and they usually have the lowest interchange of any card type. Debit cards from smaller banks and credit unions are exempt from the cap, so their interchange is typically higher, though still generally below most credit cards. Our guide on regulated vs. exempt debit covers the details.

A rough comparison

Exact rates vary by card, transaction and network, and they change over time. This table shows the general pattern, from typically lowest to typically highest cost:

Card type	Relative interchange	Why
Regulated debit (large banks)	Lowest	Federal cap on debit interchange
Exempt debit (smaller banks, credit unions)	Low to moderate	Not covered by the cap
Prepaid cards	Varies	Depends on the program and issuer
Basic consumer credit	Moderate	Issuer carries credit risk
Rewards and premium credit	Higher	Funds points, miles and perks
Business and corporate credit	Often highest	Lower with Level 2 or 3 data on qualifying sales

An example

Here is a hypothetical illustration with round numbers, not real rates. Say a grocery store and a jewelry store each process $40,000 in a month. The grocery store’s customers use mostly debit cards. The jewelry store’s customers use mostly rewards credit cards. Even with identical pricing from the same processor, the grocery store will usually pay noticeably less in interchange. That difference is entirely card mix, which is one reason comparing your effective rate to another business’s rarely helps.

Whether you see the savings depends on your pricing

Pricing model	What happens on a low-cost debit card
Interchange-Plus	You pay the debit card’s lower interchange plus the same markup. You keep the difference.
Flat rate	You pay the same rate as on a rewards credit card. The provider keeps the difference.
Tiered	Depends on which bucket the processor puts debit in. Often you don’t see the full benefit.

For businesses with lots of debit volume, such as grocery stores, convenience stores and quick-service restaurants, this can be one of the biggest factors in total cost.

What you can and can’t control

You can’t choose which card your customer hands you, and card-brand rules limit how far you can steer them. You can still make sure each card is processed the way that keeps its cost down:

• Accept debit cards at the terminal by chip or tap, with PIN entry available where your setup supports it.
• Make sure your terminal or POS is set up to recognize debit cards correctly, so they are not processed in a more expensive way than needed.
• Settle batches daily so debit and credit transactions both earn the category they should.
• Review the card summary on your statement once a quarter to see how your debit and credit share is trending.
• If you’re on flat-rate or tiered pricing and most of your volume is debit, ask what your cost would be on Interchange-Plus.

None of these steps require changing how customers pay. They make sure you’re not giving away the lower cost that debit already carries.

Debit rules to know

• Surcharging: card-brand rules don’t allow surcharges on debit or prepaid cards, even when the customer chooses credit at the terminal. A surcharge program has to identify debit cards and leave them out.
• PIN vs. no PIN: how a debit card is processed, with or without a PIN and over which network, can affect the cost. Your card summary shows how your debit volume is running.
• Routing: federal rules also require debit cards to be able to run over more than one unaffiliated network, which gives merchants some choice in how debit is routed. Ask your processor how yours is handled.

Card-brand rules and federal debit rules change. Check current rules before you change your surcharge or debit setup.

What PayZoom does

PayZoom recommends Interchange-Plus pricing, so when a customer pays with a low-cost debit card, the lower cost goes to you. Interchange and card-network fees pass through at cost, and our margin sits on its own line, as low as 0.05% + $0.22 per transaction, depending on your setup. Our surcharge programs use BIN-based debit detection, so debit cards are left out automatically. Send one statement for a free statement analysis and we’ll show you how much of your volume is debit and what it is costing you. Learn more about credit card processing with PayZoom.