Credit Card Guide

What Is A Signature Transaction Fee?

1 June 2013 by CreditCardsCo™

As a consumer using your debit card is a convenient alternative to writing checks. It also replaces expensive credit card and removes the risk of carrying cash. Merchants, though, have to pay for the use of the point-of-sale keypad, which is a cost they often pass on to the customer. Hence, you should consider signing for your purchases.

There are various types of plastic money alternatives that you can use in place of cash. Each of these has different terms and fees that merchants must follow in order to be able to process these cards in their businesses. Of course, these are fees that are often required of the customer.

You may not be aware of this, but when you use a card to pay for things at a local store, that merchant must pay a fee in order to process it. The fee they must pay typically depends on the type of card.

If you use your credit or debit card often, you probably don't think about how much it costs the merchant to process it. In fact, you might disregard it completely, assuming that it is a convenience offered by the merchant to earn your business. However, you may occasionally come across one of these fees in your daily dealings and wonder why you must pay it.

Credit Vs Debit Vs Check

One thing you may not understand is that there are three kinds of "plastic."

  • Credit Card
  • Debit Card
  • Check Card

Obviously, a credit card is used in place of cash and charges the user an interest rate for the balance remaining in the account. Debit cards and check cards are often used interchangeably but a true debit card does not bear a "credit card logo" whereas a check card does. A check card, then, allows you to access your checking account without having to write a check.

The difference between these three is somewhat indecipherable to most consumers, but that is because the only way that they are truly different is in the fees the merchant must pay to process them.

Credit Cards

Most people are familiar with credit cards. They charge the user an interest rate on purchases made. It's like a small loan that you can take out for each purchase you make. A merchant who offers credit as a form of payment pays a fee per transaction to the credit company. This is not necessarily something that a consumer ever realizes.

Debit Cards

Debit cards can be run like credit cards, but they possess the option of entering a PIN instead of signing for the purchase. Card issuers, then, will charge the merchant per PIN entry and never charge the possessor of the card.

Check Cards

Check cards act like credit cards and debit cards combined. You can use them wherever major credit cards are accepted and sign for them just like a credit card. The only difference is that the money comes out of your checking account. Credit card companies will charge for the PIN and the signature transactions performed with this type of card.

The Fees

A merchant might elect to charge a signature transaction fee if they feel that their merchant fee for signature transactions is too high to be compensated by purchases. This is very rare, but it can happen. In fact, most people are probably familiar with the PIN transaction fee that small corner stores and gas stations require you to pay when you use your check card at their establishment. This requires you to pay up to usually less than $1 for each transaction. It is similar with a signature transaction fee.

Final Word

You may be paying a signature transaction fee and not know it as it might be included with the price of your transaction. Also, a merchant may inform you that they will add it to the transaction. Either way, you should know that it is something credit issuers charge to use their products.

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