What Is a Merchant Account Discount Rate?

A merchant discount rate is a percentage rate charged by a bank or credit card service company to a merchant for processing credit card transactions. The rate varies by credit card processing service companies and by how the transactions take place.

Purpose

• Companies providing credit card services make money from merchants by charging a discount rate. The discount rate is a percentage charged for each transaction accepted by a merchant. The merchant's sales amounts are discounted based on this rate, causing the merchant to receive a discounted amount of the credit card purchases.

Features

• Discount rates are lower if the credit card is swiped versus the merchant keying in the transaction or if the merchant makes the transaction over the Internet. Internet and phone transactions tend to be riskier than sales made in person. Therefore these charges are typically slightly higher.

Details

• According to Merchant Seek, on average businesses accepting Internet orders pay a discount fee of around 2.3 percent; while retail merchants pay around 1.79 percent. Credit card processing service companies may however charge between 3 and 4 percent depending on the company.