Why don’t I need to enter my PIN when I use a credit card in the U.S.?

By | August 23, 2014

First I will give a little background, and then I will answer the question.

Original Cards were Credit, Charge or ATM

In the U.S., debit cards have historically been PIN based, and credit transactions have been signature based.  You had networks like Visa, MasterCard, Discover, Diners Club and American Express who originally issued only credit and charge cards requiring a signature.  And you had the ATM networks such as Pulse, NYCE, Star and dozens more which required a PIN to use, and originally did not work at the point of sale, only ATMs.  Back then, there was no such thing as a debit card that worked at the point of sale.

New Class of Cards: Debit at POS

Fast forward to today, and both the credit card networks, and the ATM networks wanted to get into the debit game.

So the credit card networks allowed debit transactions over their networks with a signature (called “Signature Debit”). MasterCard Debit, Visa Check Card and Discover Debit are all examples of signature debit.  There system could not handle PINs, so it is natural they processed the debit cards the same as a credit card.

On the other side, the ATM networks also wanted in at the POS and started to allow their cards to be used at retailers with a PIN.  Now Pulse Pay, NYCE, Star and dozens of other debit networks now work at retailers who sign up to accept debit cards.  Since their networks were already PIN based, it was natural for them to make the new debit cards PIN based too.

Nowadays, most debit cards connected to a checking account work on both the “credit” network and the “debit/ATM” network.  You can usually choose to sign or use your PIN at the register.

It should be noted that when you sign up to accept payments, you are usually initially offered the credit / signature debit networks only.  Most payment processors offer PIN debit for an extra fee and/or as a separate application or add on.  You also need additional equipment, such as a PIN pad to take PIN debit and PIN debit does not work over the internet (there are some initiatives working to change that).

Why Not PIN Credit?

Well, part of the reason is that credit cards were originally created before PIN technology existed, and they have kept that model, and also because people are so used to it, they don’t want to change it.  In fact, the trend is going the opposite way, where no signature or PIN is required for purchases under a certain threshold (such at $25) for credit or signature debit purchases.

There has been several studies done about U.S. consumers and PIN vs. signature, and for debit cards, people are of mixed opinions.  Many always use the PIN on the debit card at the POS, or others like me prefer to sign and not enter the PIN.  Consumers do not seem to want PIN credit in the U.S. and the card associations and payment processors are taking note of that.  If customers do not want a PIN credit card, then the bank that offered it would lose market share to cards that are signature-based.  Also, the credit networks do not work with PINs, only the ATM/debit networks work with PIN.  So entire networks would need to be changed to make such a thing work.

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