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Rewards checking accounts typically require 10-12 monthly transactions to earn decent interest. Often I see that they require these transactions to be "PIN-less".
I neither understand exactly what this means, nor do I understand why this matters for the bank.

I know that when you use a debit card in a store, you can either use it "as debit" or "as credit".
My understanding was that the former always requires a PIN, and the latter never does.
I also used to think that merchants get charged for credit transactions, but not debit transactions.

However, it seems like a PIN-less transaction is neither of these, which raises questions for me:

  1. What are PIN-less transactions for debit accounts? Aside from the fact that you don't need to enter your PIN, how are they different from regular debit transactions? How are they different from debit transactions that are processed via credit?

  2. Can any transaction be PIN-less? If not, which transactions can be PIN-less?
    (e.g. online vs. in-store, groceries vs. services, etc.) I'm basically trying to understand how easy it is to actually perform 10-12 PIN-less transactions during a month.

  3. Why does requiring the transaction to be PIN-less benefit the bank in any way? Does it avoid some kind of fee for the bank? Does it let them charge the merchants some extra fee? etc.

Additional relevant information about the topic is appreciated as well.

  • It typically means the transaction must be run as credit, not debit. – quid Oct 28 '16 at 17:46
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What are PIN-less transactions for debit accounts? Aside from the fact that you don't need to enter your PIN, how are they different from regular debit transactions? How are they different from debit transactions that are processed via credit?

A PIN-less transaction and a "as credit" transaction with your debit card ARE the same thing. When you swipe your debit card as credit at a store, you don't have to enter a PIN, therefore, it's a PIN-less transaction.

Can any transaction be PIN-less? If not, which transactions can be PIN-less? (e.g. online vs. in-store, groceries vs. services, etc.) I'm basically trying to understand how easy it is to actually perform 10-12 PIN-less transactions during a month.

Almost all transactions on the Internet are PIN-less; you use your debit card as credit and never enter a PIN number. In physical stores, usually the cashier will ask you whether to swipe the card as debit or credit. If you choose credit, you don't have to enter a PIN and the transaction is then PIN-less.

Why does requiring the transaction to be PIN-less benefit the bank in any way? Does it avoid some kind of fee for the bank? Does it let them charge the merchants some extra fee? etc.

Debit transactions usually only cost the merchant a few cents. Banks get to charge the merchant higher fees when the card is swiped as credit instead.

  • Are you sure they're the same thing? I'm fairly sure they're not... would be nice if you could link to something supporting the claim. – Mehrdad Aug 7 '15 at 1:19
  • Yes, a credit card transaction, which does not use the PIN, is a PINless transaction. If you aren't sure that's how it will be interpreted, ask your bank; in the end their opinion is the one that matters. – keshlam Aug 7 '15 at 1:42
  • @Mehrdad as credit and pin less are the same thing. I'm curious as to why you think otherwise; what information do you have to the contrary? – briantist Aug 7 '15 at 6:10
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    Complete at least 12 Debit/Check Card point-of-sale purchases (transactions must be made without using your personal identification number (PIN)) This doesn't mean debit transactions, it means transactions made with your (debit/check card). They are describing the card as debit, not the transaction. Your card is called a debit card whether you use it for a credit or a debit transaction. As Yasmani said, it's up to the bank, so just ask them. – briantist Aug 7 '15 at 18:09
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    @briantist: Ohh I see. Wow, that's confusing. +1. Thanks. – Mehrdad Aug 7 '15 at 20:43
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PINless Debit – NO PIN entered. Determination of authorization as PINless debit is based on merchant category code, must be card NOT present, issuing bank approves. Rides the Shazaam, Pulse, Star, etc… rails

  • While your answer is appreciated, it isn't very clear exactly what you're saying here. Could you edit and clarify it please? – Daniel Anderson Oct 29 '16 at 16:47
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All Electronic Payment Transactions run down a Network.

Officially titled the "Debit Network and the "Credit Network"

For banking there is also the "ACH Network"

V/MC allow their issuers to issue card accounts that are based on:

1) A bank account a bank account (real funds) 2) A line of credit

These are deemed Debit Cards and Credit Cards.

Okay now if you have a Debit Card there are 2 types of transactions that can happen:

••• A PIN based TXN that runs down the DEBIT Network. ••• This is called an ONLINE DEBIT TXN ••• You are using a Debit Card Account ON the DEBIT NETWORK ••• The trigger for activating the debit card network is entering the PIN

Or the other type of TXN that can occur:

••• PIN-LESS TXN that runs down the CREDIT CARD NETWORK ••• This is called an OFFLINE DEBIT TXN or OFFLINE SIGNATURE TXN ••• The debit card function (pin) is by passed by swiping the card and prompting validation thru the signature than a verifiable PIN CODE. ••• These swiped transactions go down the CREDIT CARD HIGHWAY. ••• Ecommerce txns where the card number is KEYED into a computer are also processed as offline debit txns.

As a consumer why do you care? 1) It is true the cost of the txn to the merchant is different but depending on how their rates are setup only the merchant really knows which one costs less.

2) For the merchant there are two separate deposits. One for the credit card txns and one for the debit card txns because they go down different highways.

So it is real easy to perform 10-12 PIN-LESS txns a month...just swipe your card...even if they say use debit.

So WHY do the banks want you to do this? If it is a part of your banking fees to have so many txns to offset the fees here is how the banks get paid.

The issuer (YOUR BANK) makes most of the fees the MERCHANT PAYS on his monthly statement. The card brands have some pre-set published set fees and then there is the cost of the network, PCI, equipment etc. But the bulk of what is paid by the merchant goes to the issuing bank.

Hope that helps.

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