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In some countries (for example US, UK), only credit cards have a hefty percentage (usually around 2%) interchange fee, while debit cards have only a small fixed fee for each transaction.

But in other countries, for example Poland, there is no such distinction, and debit cards have the same hefty 2% interchange fee as credit cards. How does it work when a debit card from such country is used in a country where only a small fixed fee is charged for debit cards? For example a polish card used in the US?

I imagine that the merchant there will be charged only small fixed fee by his acquirer, because its a debit card. But then the issuing bank will charge Visa/MasterCard a 2% interchange fee. So it seems there will be a loss, or am I getting this wrong? Does Visa/MasterCard or the acquirer eat the loss? Or are merchants in the US or UK just charged the 2% fee for all foreign debit cards (instead of the usual 20 cents or few pence), just in case? That doesn't seem fair, as the merchant might have given a discount for using a debit card, not knowing it was a foreign card, and then unexpectedly gets charged like a credit card.

Oh, and by the way: many VISA cards have not written on them if they are a credit or a debit card, how does a merchant know in advance which type of VISA it is, and what fee will be charged?

  • I don't think that's correct. I'm pretty sure that, at least for domestic transacitons, the fees (in Poland) are limited by law to 0.3%, see forbes.pl/… . This limit is the fee for credit cards, and for debit cards it is actually lower, at least in MasterCard, see mastercard.pl/punkty-handlowo-uslugowe/_assets/… – tomasz May 6 '15 at 21:22
  • When it comes to international transactions, at a glance it seems like the rates are the same across EEA in both Visa and MasterCard. – tomasz May 6 '15 at 21:26
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Most Non-US debit cards would run on Credit Card network in US. The Debit card issued in India for example specifically mention that , if its being swiped in US, then specifically mention to swipe it as a Credit Card, else it won't work.

So the fees as applicable to a Credit card would be charged.

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Unless local POS providers established different rules, debit transactions are handled the same as credit, with two significant differences:

  1. Debit always requires prior authorization (credit may not).

  2. Debit will always charged immediately whereas credit... well - credit.

In Poland, per your question, there are no special rules for debit transactions, in the US - there are.

International cards are usually considered "debit" by the local providers (the second rule applies to the issuer, so they don't care when the card holder is actually charged) regardless of their kind, however Canadian/UK/US/Mexican cards (that may have common networks) may work differently within these countries.

So, to answer your question, Polish cards in the US stores will be treated as "debit using credit", i.e.: Always require authorization, never use PIN. ATM works differently, and do require PIN.

  • Well, my question was just about fees charged to the merchant and interchange collected by the bank in cross-border debit card transactions, and your answer says nothing about fees. – miernik Nov 14 '11 at 4:18
  • @miernik - as I said - this is considered a credit card transaction with regards to everything, that includes fees. I though that was pretty clear. – littleadv Nov 14 '11 at 4:45

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