Comments on: WSJ vs PIN A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Avivah Mon, 22 Nov 2010 20:00:07 +0000 Hi, sorry about the confusion. The press doesn’t have enough print room to give the full context.

Adding a PIN to a payment (e.g. PIN debit) is more secure than not having the PIN. So PIN debit is definitely more secure and less fraud prone than signature debit.

HOWEVER, the banks earn more interchange revenue on signature debit (since they can rightfully claim that they are riskier payments so they need the increase in revenue to offset the fraud costs). So they distort the market (in a sense) by incenting consumers to use the more risky debit transaction type – or signature debit.

The banks incent the cardholders to NOT ENTER THEIR PINs on debit transactions by:

a) covering them more generously in the case of fraud when they don’t enter their PIN
b) giving them loyalty (e.g. frequent flyer) points when they don’t enter their PIN.

Check out the fine print on the check card agreements from most banks.

So in sum, consumers are incented to use a less secure form of debit card payment – signature debit – so that the banks can make more money. Merchants pay banks less for PIN debit transactions even though they are more secure and they would much rather accept a PIN debit transactions. So merchant incentives are at odds with consumer incentives. (Walmart sued over a derivative of this issue years ago, which resulted in a $5 billion award for Walmart and other retailers that Visa and MasterCard had to pay out, and the convoluted concept we are stuck with now which is ‘using your debit card as a credit card’).

As a consumer, you are better off not entering your PIN on a debit card transaction since you will be covered much more quickly and easily in the event of fraud.

Hope this murky situation is clear.


By: soja Mon, 22 Nov 2010 19:31:30 +0000 a PIN transaction is more secure for the bank. each time a customer uses a PIN transaction, however, they open themselves to the possibility that their PIN can be skimmed. i only use my PIN at ATMs, make purchases in only credit/cash and pay my favorite small businesses in cash. beyond simplicity, i see no value in making a debt transaction if i have credit.

By: TFF Mon, 22 Nov 2010 19:24:40 +0000 I suppose a transaction limit would help, though sometimes it doesn’t take much to drain my account. But do debit cards always require a PIN? Or can they also be used without? I was under the impression that the latter was the case.

Have never had a problem with budgeting (in good times or bad), so I don’t view credit cards as “debt”. Instead view credit balances as “money which will soon be removed from bank account” (and thus unavailable for other purposes). Not terribly different from a debit card in that regard, though the debit card dings the account more immediately.

By: hsvkitty Mon, 22 Nov 2010 18:34:01 +0000 Well, not quite TFF. The person has to have the pin and if you are crazy enought to have your pin in your purse, or someone look over your shoulder, then yes it can be drained.

You also can have limits on your account and the bank also has limits of transactions in a day so they can’t drain your account.

Whereas, as a traveler, the transactions on my credit card were much harder to verify and they seldom notified me if there were large items on it… even from outside the country, because it wasn’t abnormal.

In poorer economic times I would rather use a debit and have the amount o money I actually have available to spend be my guide, then have debt build up on my credit card. So in essence, I am actually more old fashioned! heheh

By: TFF Mon, 22 Nov 2010 17:43:00 +0000 Podunk, even the EXISTENCE of a debit card puts you at risk. If you lose your wallet, your account will be drained within two hours. Possibly before you even realize your wallet is missing. Then those checks you wrote last week? Overdraft fees when they hit the account.

Maybe I’m just old-fashioned, but I lived happily for many years before debit cards were invented. How exactly do they improve my life?

Twice (over many years) our credit card was stolen. Both times the dispute resolution was quick and straightforward, and all fraudulent charges were reversed at no cost to us. I would use a PIN/chip credit card, if one were available, but would never risk attaching a card to my checking account.

By: PerkStreetJen Mon, 22 Nov 2010 17:10:15 +0000 @boobalah Yep, that’s a different Bancorps. The Bancorp behind PerkStreet is this one:

Jennifer Spencer
Digital Communications Manager
PerkStreet Financial

By: Podunk Mon, 22 Nov 2010 16:40:58 +0000 I agree that there is some question as to the beneficiary of the safer transaction. I rarely use my debit card, because if the number is stolen and used, the money will come directly from my bank balance. Even if I get the bank to refund the fraudulent charges, I’ll be at risk of overdrafts until it is fixed, possibly weeks later. So, even though the legal framework for fraud protection is the same, in practice credit is more consumer-friendly.

As for PIN vs. signature debit, whether I use a PIN or not, if the signature option is available, then someone else can use it. Also, if someone gets my PIN, (which isn’t all that hard. It’s a small search space, and it’s easy to look over shoulders as the PIN is entered) then I would imagine it would be harder to prove fraud. After all, a known PIN is easier to forge than a signature. So while PIN-only debit may be safer in some ways for the bank, and in fewer ways for the consumer, I’ll stick with credit until retailers are able/willing to reimburse me for the added risk I’d take on with debit.

By: jeremym Mon, 22 Nov 2010 14:48:47 +0000 I think the question here is “safer for whom?” PIN-based transactions may be safer for banks and less safe for consumers if it is more difficult for customers to dispute PIN-authorized transactions.

By: boobalah Mon, 22 Nov 2010 14:19:04 +0000 I have a Perkstreet debit card, which is owned by Bancorp. Given that one gets 1-2% cashback on signature debit purchases, there is a strong incentive to use signature. Are there two different Bancorps in question?