PINless Debit Transactions

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Some transactions paid with debit cards are now being processed as "PINless Debit." The name is a bit confusing. It doesn't mean that you aren't using a PIN for a transaction riding on the VISA, Mastercard, etc. offline networks. It means that the transaction is shifted to the NYCE, Pulse, or STAR online networks without a PIN, even though these networks traditionally required a PIN.

For the cardholder, this means that you probably won't get any rewards (if there are any offered). PerkStreet has a warning about this. It also means the funds can be deducted instantly, instead of a hold with settlement 2-3 days later. For the merchant, it means that transaction costs are greatly reduced. (Even after debit card fee reform, it is still advantageous for the merchant to use the online networks.)

I noticed that Amazon is now doing this too. Previously only insurance companies, utilities, etc. that had a close and ongoing relationship could use the online networks without a PIN.

Since this happens with no input or approval by the customer, you could easily lose your Visa/Mastercard no-fraud guarantees without even knowing it. Amazon allows you to opt out, but you have to first setup the card and then go to the payment method edit page to change the setting. If Amazon is processing your card in this mode, it will list the card as a "debit" card, not as a Visa/Mastercard/etc. Not all debit cards support this, so they will still show Visa/Mastercard/etc. by default.

I noticed that some rebate gift cards (which didn't list any of the online networks) were processed by Amazon as PINless debit. I'm surprised that these cards even allowed it, since they prohibit ATM transactions and presumably want to get as many fees as possible.

Just a heads up, it would be interesting to see what happened in a fraud case involving PINless debit, when the customer thought they were using VISA's advertised no fraud guarantee. And if a chargeback is warranted, it would be interesting to see how the bank handles it, since the traditional Visa/MC rules wouldn't apply.

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I have never been a fan of any logo debit card that does not require a PIN for any amount regardless of what network it uses. It still hits your "cash" balance immediately. I keep minimal amounts in the accounts linked to these cards for just that reason.

I noticed that using my rewards checking debit card to pay my phone bill that this showed up recently as "PINless Debit." I believe this just started last couple of months. All of my transactions with pin or without show as "POS" transaction and to appear to have counted but I believe some rewards checking accounts require without a pin.

I noticed that some rebate gift cards (which didn't list any of the online networks) were processed by Amazon as PINless debit. I'm surprised that these cards even allowed it, since they prohibit ATM transactions and presumably want to get as many fees as possible.

I am sure that they are doing it to save on transaction costs. Any ideas on how "PINless Debit" could actually help the FW crowd liquidating pre-paid debit cards that don't have pin numbers?

ScottMalinowski said:   I have never been a fan of any logo debit card that does not require a PIN for any amount regardless of what network it uses. It still hits your "cash" balance immediately. I keep minimal amounts in the accounts linked to these cards for just that reason.

Scott,

A PINless debit transaction enables your card (which appears to always require a PIN) to be used without a PIN. So if say Amazon has the number of your card with the STAR, NYCE, or PULSE networks listed on the back, they can debit it with no PIN. These networks want to participate in Internet transactions too, not just ATM/Point of Sale.

I'm not sure if Cirrus or PLUS allows PINless debit, but they do not appear to at this time. (And it would siphon fees from the parent MC/VISA networks).

maddybeagle said:   I noticed that using my rewards checking debit card to pay my phone bill that this showed up recently as "PINless Debit." I believe this just started last couple of months. All of my transactions with pin or without show as "POS" transaction and to appear to have counted but I believe some rewards checking accounts require without a pin.

I noticed that some rebate gift cards (which didn't list any of the online networks) were processed by Amazon as PINless debit. I'm surprised that these cards even allowed it, since they prohibit ATM transactions and presumably want to get as many fees as possible.

I am sure that they are doing it to save on transaction costs.


In that case, Amazon saves on the transaction costs. But the card issuer loses on the interchange fees that Amazon would otherwise pay. So it is hard to see the issuer's inventive to allow it, or even participate in the NYCE/Pulse/STAR networks that power PINless debit. Perhaps it was unintentional, or there are default gateways between the networks.

Any ideas on how "PINless Debit" could actually help the FW crowd liquidating pre-paid debit cards that don't have pin numbers?

If it becomes more prevalent, it makes rebate cards lose their incentives (interchange fees) for rebate card issuers....

NEDeals said:   ... it would be interesting to see what happened in a fraud case involving PINless debit, when the customer thought they were using VISA's advertised no fraud guarantee. And if a chargeback is warranted, it would be interesting to see how the bank handles it, since the traditional Visa/MC rules wouldn't apply.

Even though Visa's zero liability program might not cover these transactions, the chargeback process would be no different to the consumer in 99.9% of cases. You'd be hard pressed to find a bank that would hold you liable for anything in a fraud situation. We don't even look at the network it processed through (although I am sure our third party provider does).

People use debit cards?

raringvt said:   People use debit cards?
Yes, I need it for my RCA.

If the costs are reduced to merchants, I see this as a good thing since it will allow merchants to be slightly more competitive with pricing and the cost savings would be somewhat passed onto the consumer.

ScottMalinowski said:   I have never been a fan of any logo debit card that does not require a PIN for any amount regardless of what network it uses. It still hits your "cash" balance immediately. I keep minimal amounts in the accounts linked to these cards for just that reason.

Exactly. Sometime you need access to cash. Using a debit card at any grocery store for a bottle of water or banana *plus* Cash Back has both health benefits and no transaction fees. Apart from the occasional need for small amounts of liquid cash, everything else is on a rewards-based credit card then paid off every month. For that reason, I like to keep less than $200 in the debit card account.

NEDeals said:   
In that case, Amazon saves on the transaction costs. But the card issuer loses on the interchange fees that Amazon would otherwise pay. So it is hard to see the issuer's inventive to allow it, or even participate in the NYCE/Pulse/STAR networks that power PINless debit. Perhaps it was unintentional, or there are default gateways between the networks.
The Dodd-Frank act required that any debit card that could be used for retail transactions must be processable through at least two unrelated networks. 15USC1693o-2(b) The idea being that giving the merchant the power to choose between competing networks would cause the networks to lower the fees charged to the merchants.

gloreglabert said:   raringvt said:   People use debit cards?
Yes, I need it for my RCA.


I always use one for Chicago's parking meter (gets me at least most of my required transactions a month), but cry a little. Not because of the rates, but because I can't use AMEX instead and cause Laz's (parking operator) costs to increase...

omarECD said:   If the costs are reduced to merchants, I see this as a good thing since it will allow merchants to be slightly more competitive with pricing and the cost savings would be somewhat passed onto the consumer.

You jest right?

lastgaspjr said:   NEDeals said:   
In that case, Amazon saves on the transaction costs. But the card issuer loses on the interchange fees that Amazon would otherwise pay. So it is hard to see the issuer's inventive to allow it, or even participate in the NYCE/Pulse/STAR networks that power PINless debit. Perhaps it was unintentional, or there are default gateways between the networks.
The Dodd-Frank act required that any debit card that could be used for retail transactions must be processable through at least two unrelated networks. 15USC1693o-2(b) The idea being that giving the merchant the power to choose between competing networks would cause the networks to lower the fees charged to the merchants.


I thought about that, but am unsure that prepaid rebate cards were included in the Dodd-Frank bill. Regardless, the cards did not display the online network name on the back, just the Visa/MC on the front. But PINless debit was successful, according to Amazon. Someone asked for which card, it was a rebate card that I matched to the Amazon payment page via the last four digits. I don't remember which one, I'll see if I can find it again. (There were others listed on my Amazon account, but I may not have the actual cards anymore.) I would only use "debit" cards with Amazon that are rebate cards.

I noticed this with my natural gas company. They use a payment processor and it posted as pinless debit (I guessed it was processed through STAR). It's annoying, since I expected to earn 1% and did not earn anything!

raringvt said:   People use debit cards?

I have a stack of them a mile high that plainly say "Debit" on them. Venturion and Shaftslinger probably swim in them.

Vanilla10 said:   raringvt said:   People use debit cards?

I have a stack of them a mile high that plainly say "Debit" on them. Venturion and Shaftslinger probably swim in them.


Yeah, I collect those cards too. But my collection is only slightly larger than a shoebox full.

mcmike522 said:   Vanilla10 said:   raringvt said:   People use debit cards?

I have a stack of them a mile high that plainly say "Debit" on them. Venturion and Shaftslinger probably swim in them.


Yeah, I collect those cards too. But my collection is only slightly larger than a shoebox full.


Some hyperbole. Mine also could be contained in a few shoe boxes.

Bump. on this one. One of my local credit unions does not differentiate between "pinless" for POS transactions on rewards checking. Great Lakes Credit Union and I am sure others require it to be processed as a "credit card". I had to redo my transactions for the month. My phone company's online bill payment, allows for you to change it to a credit card-type transaction.



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