During the week, I often make stops after work to pick up a few things — milk, groceries for the night, toiletries and/or an impulse clearance find. On several occasions after swiping my card for these items, I wasn’t prompted to sign for my purchase. I had the terminal pen in hand, all ready to sign on that magnetic terminal pad. But instead, the cashier handed me a receipt and said I was “good to go.”
The purchases are small–usually under $50–and made at either a grocery store, superstore like Walmart or Target or at a pharmacy/convenience store like Walgreens. My transactions didn’t seem that unusual and I couldn’t figure out why I was having varying cardholder experiences.
So I decided to do a little research.
As it turns out, not signing for smaller credit card purchases is not a glitch in the system or a security protection failure.
In an effort to make small credit card transactions quicker, more convenient and more popular, several major card networks have established no-signature-required programs.
The policies allowing merchants to accept credit card payments for small credit card purchases without signatures began when MasterCard implemented its Quick Payment Service program in 1991. Since then Visa, American Express and Discover have also implemented policies allowing face-to-face transactions under a specified amount to be approved without a customer signature so long as the credit card was issued in the U.S. MasterCard and American Express have their no-signature thresholds set at $50 or less. Visa has two thresholds: $50 for purchases made at discount, grocery and supermarket stores and $25 for all other eligible categories. Discover’s is set for under $25 across the board.
However, not all small transactions qualify. In order for a customer to get by without signing, the type of product or service being bought must have an eligible merchant category code.
MCCs are four-digit numbers issued by payment networks that identify what type of product or service a merchant provides. Approximately 98 percent of all MCCs qualify for no-signature programs, according to Visa, but here are some of the general categories that don’t:
- Wire transfer money orders
- Automated fuel dispensers
- Direct marketing services
- Cash disbursements from financial institutions
- Betting and gambling expenses
- Prepaid card loading
- Intragovernment purchases
So you can pay for your $6 value meal at McDonald’s with your credit card without a signature, but you’ll need a signature to pay for scratch-off lottery tickets.
Merchants with eligible MCCs and that accept major card network payments are automatically enrolled in no-signature programs. To allow their customers to participate, merchants may need to update point-of-sale terminal programming so signature prompts adjust to purchases accordingly.
However, since there aren’t standard requirements in place specifying when or if a merchant needs to implement such point-of-sale changes, according to Visa and MasterCard’s policy guidelines, you may have to sign at one retailer but not another for buying the same thing. For example, , the purchase of a few toiletry items at a major superstore may be processed without a signature, but the same purchase at a corner convenience store that has not programmed their point-of-sale terminals to bypass signature authentication on small transactions would not. Both are eligible for no-signature-required transactions, but merchant technical differences create varying customer experiences at the checkout.
It’s to a merchant’s advantage to get on board with no-signature programs if they qualify. Just as not having to sign simplifies small transactions for consumers, the abridged process does the same for retailers and payment processors. Less time spent processing transactions leaves more time to make sales, according to Beth Duff of electronic payment processing company TransFirst.
For those worried that signature-less credit card transactions may make room for an increase in fraudulent transactions, don’t fret too much.
The risk that someone could take your card and make small, fraudulent purchases does exist, but it’s not a large one. According to the 2013 Federal Reserve Payments study, unauthorized general-use credit card transactions only accounted for 0.037 present of all card-present transactions in 2012. Card-present transactions means a customer is at a store or other point-of-sale location and physically swipes or scans a card to complete their purchase, as opposed to entering a card number at an online checkout.
When Visa extended its transaction limit to $50 from $25 in 2010, it re-evaluated the potential for fraud. After the original no-signature program was introduced in 2003, Visa did not see a “bump in fraud and that’s why we are comfortable expanding the program to the benefit of cardholders and merchants,” Visa spokeswoman Erica White told CreditCards.com at that time.
But if something does happen, low-value transactions are still protected by network fraud liability and charge-back policies, so long as they fit the approved no-signature program criteria.
As the country begins its shift to EMV-equipped cards, some of which require a PIN instead of a signature, these no-signature-required policies may change. But for now, if you stop for a few groceries on your way home from work and don’t have to sign, enjoy the ease of a swipe-and-go transaction.
And if I’m in front of you in line, say, “Hi.” I’ll be the one who doesn’t have a puzzled look anymore.