Visa to Offer Rewards on its Debit Cards

In an article in the Wall Street Journal, Ron Lieber describes a new rewards program to be offered by Visa to its debit cardholders. Beginning next spring, consumers who sign for their Visa debit card purchases will be automatically entered in a reward program that provides free theatre tickets. The number of points they earn towards the rewards will depend upon how much they spend. However, only those debit cardholders who sign their credit card slip will be eligible for rewards—not those who merely enter their personal identification number (PIN) on the slip. How come? Many merchants offer consumers a choice between signing the charge slip and merely entering their PIN. The transaction is faster using a PIN and, more important, the merchant pays a low transaction fee to the companies that run the PIN network. In contrast, when a customer signs a credit slip, the card-issuing bank gets a fee on the transaction that is about four times that received when a customer uses his PIN. Readers may recall that this differential pricing is at the heart of the lawsuit filed by retailers against the Visa and MasterCard associations.