The card must be swiped through the terminal and an external/internal PIN Pad is used to enter the merchant’s four digit PIN. The terminal will pass the encrypted number to the bank for verification. The merchant will then be paid for the transaction in the same manner and time frame that they would be paid on a credit card sale. The cost of this type of transaction is potentially lower due to the way in which the merchant is charged by the processing companies. Rather than paying a flat fee and a discount rate, or percentage of the transaction (as with a credit card or offline debit transaction) there is only a slightly higher flat fee.
The Durbin amendment will now help you save money on your debit card processing even without a pin pad.