To understand how signature debit works when talking about debit cards, one must understand the difference between a debit card and a credit card. Debit cards draw money from an account which already has funds in it. Credit cards draw money from a line of credit. A person usually cannot draw more money or pay for an item that costs more than what is already in the bank account. Credit cards usually have a credit limit which imposes a figure on how much money you can draw.
In signature debits, the person signs for the purchase just as he or she would sign for a credit card purchase. There is no need to enter in a PIN. There is another type of debit known as a “PIN debit“. With the PIN debit, the person enters in the Personal Identification Number or PIN number that they received with their debit card into a PIN number device at the checkout. It typically costs the merchant less to run PIN debits than signature debits and therefore many merchants install PIN readers to their Point of Sale devices. However, both types of debit transactions cost less than credit cards, making debit cards a preferred by merchants.