What is the difference between a signature based purchase and a pin based purchase?

There are two ways that purchases can be made using your debit card.

PIN Based: when you make a purchase entering your Personal Identification Number or PIN into the credit card terminal. The transaction is done on real time and the money is held from your account right then and there and you see the amount being withheld from your available balance immediately. Personally I like this type of transaction better than signature based because the amount is deducted ASAP, however if you are enrolled in a rewards program with your bank, chances are you wont get points for those pin based purchases.

Signature Based: These purchases occur when you use your debit card but instead of entering your pin, you sign the receipt for verification. Usually these purchases take a couple of days to hit your account because they are not processed immediately since they have to go through the same process as credit cards. This is where you can get in trouble if you don't keep a tight record of your spending. Since you don't see the purchase immediately withheld from your account, you can have other purchase or checks that will hit your account the same day thus overdrawing your account if you forget to log in one of these purchases. This is a very common mistake done by consumers and a costly one at that. Overdraft fees can cost up to $35 a pop, regardless of the amount of the transaction.
Signature based purchases do qualify for points so make sure you are signed up with your bank's rewards program. If you have a VISA, you can look at www.visaextras.com for more information. Banks offer these rewards to their customers because they get a higher kickback from the fees that merchants pay when they accept your card for payment. If you are a business owner and you and accept credit/debit cards than you should be aware that you are paying higher fees per transaction when you take a debit card and process it as a signature based transaction as opposed to a pin based.

So if you run a tight balance on your checking account and want to stay out off harms way, then use the PIN based form. If you want to accumulate points and trade in those points for some cool stuff, the sign away baby!