Signature Debit Transactions

When you read the cardholder terms and conditions for different prepaid debit card products (you do read them, don’t you?), you’ll see that there are two kinds of point of sale transactions you can use a prepaid debit card for: “signature debit” transactions, and “PIN debit” transactions.

It is very important for you to understand the difference between these two kinds of transactions.

Here’s what a “signature debit” transaction is.

When you use a prepaid debit card to pay for something at a merchant point of sale location, you can choose to sign a receipt (or you can choose to enter your PIN number – a “PIN debit” transaction). If you choose to sign the receipt, you are making a “signature debit” purchase.

When you use your prepaid card on the Internet, it is typically (but not always) processed as a “signature debit” transaction, even though no signature is obtained for the purchase.

Here are two reasons why it is very important for you to understand the difference between signature debit and PIN debit transactions:

  1. Your card issuer may charge you DIFFERENT fees depending on whether you do “signature debit” vs. “PIN debit” purchases.  Read your cardholder agreement… and then use whichever option is CHEAPER!
  2. If your prepaid debit card is either a MasterCard or Visa prepaid debit card, you enjoy better protection if you use “signature debit” for your purchases.  For example, MasterCard provides a “Zero Liability” policy which ensures that you don’t have to pay for any unauthorized transactions (if you register your card and follow other rules).  Visa offers a similar “Zero Liability” policy.
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