Using prepaid cards are great when it comes to convenience. You don’t need to carry cash and you can use them just about everywhere. When you use your card for an in store transaction, you will have the option of signing for your purchase or using your PIN to complete the transaction. Knowing the difference could be important, especially since some prepaid cards charge a fee for PIN transactions, but not for signature transactions. This brings up the importance of knowing what type of fees your card charges and knowing when you will be charged.
Signature vs. PIN
A signature transaction is when you have to sign for a purchase you made instead of entering your personal identification number (PIN). When a card has a major credit card company logo, like MasterCard or Visa, this means it can be swiped for an in store purchase where Visa or MasterCard are accepted. At the end of the transaction you have to sign your name agreeing to cover the purchase amount.
A PIN transaction is when you use your personal identification number to complete your transaction, much like a bank debit card. Your PIN is a unique set of numbers or letters that allows you to access your account. You can do so by making a purchase or from an ATM. In many cases, the PIN is what allows you to make a purchase and not have to show identification. Its a way to prove the card is yours. A PIN offers security for your account because only the person with the PIN number can access the account. This is why you shouldn’t give out your number.
How Do I Know Which One To Use?
It’s important to understand that PIN and signature transactions are identical in terms of your account balance. In both cases, the amount of the purchases is subtracted from your prepaid card account. The difference, for some cards, is in the amount of fees charged. If your card charges a fee for a PIN transaction, then the choice is easy–use a signature transaction. You can choose a signature transaction by processing the transaction as a credit, rather than a debit. In some cases, the machine you use to swipe the card will ask you for your PIN, even if you have selected a credit transaction. In many cases, simply hitting the cancel button instead of entering your PIN will cause the device to process the transaction as a credit signature transaction.
Merchants Processing The Transactions
So why do some prepaid cards charge for PIN transactions but not for signature transactions? The answer has to do with how much money they make from the merchant on the transaction. Typically, a signature transaction costs more for a merchant to process than does a PIN transaction. Because the prepaid card company makes more from the merchant on a signature transaction, many of them pass the savings on to cardholders.