What Is the Merchant Discount Rate?
What Is the Merchant Discount Rate?
The merchant discount rate is the rate charged to a merchant for payment processing services on debit and credit card transactions. The merchant must set up this service and agree to the rate before accepting debit and credit cards as payment.
Understanding the Merchant Discount Rate
The merchant discount rate is a fee that merchants must consider when managing the overall costs of their business. Local merchants and e-commerce merchants will typically have varying fees and service level agreements. Most merchants can expect to pay a 1% to 3% fee for payment processing of each transaction. Payment processors have well-established infrastructures and fee schedule arrangements in place to support all types of merchant payments.
KEY TAKEAWAYS
->The merchant discount rate is charged to merchants for processing debit and credit card transactions.
->To accept debit and credit cards, merchants must set up this service and agree to the rate.
->The merchant discount rate is a fee, typically between 1%-3%, that merchants must consider when managing business costs.
Special Considerations
Payment processing infrastructures help support commerce across the world. Financial technology is helping payments to be processed faster with many companies developing point-of-sale (POS) services that also offer options for payment plans, loans, and lines of credit. Payment processors are at the forefront of technology development in payment processing and their relationships with merchants are key to the infrastructure of commerce.
Merchants have a range of options available for payment processing. They can utilize fintech company services, such as Square or Shopify. They can also set up merchant payment processing with a bank directly. Some of the top bank offerings for payment processing include Chase POS Payment Solutions, U.S. Bank POS Solutions, and Bank of America Merchant Services. All of these payment processors can also offer e-commerce payment processing.
For merchants, the fees and fee agreements involved in an account can be complicated. Merchants have numerous providers to choose from and these providers also offer varying fee schedules. Merchants can expect to pay a processing fee for the deposit, as well as network and interchange fees for obtaining funds from the customer’s account. Merchant discount rates for e-commerce are typically higher due to additional costs for added security.