Merchant Discount Rate

DEFINITION of 'Merchant Discount Rate'

The rate chanrged to a merchant by a bank for providing debit and credit card services. The rate is determined based on factors such as volume, average ticket price, risk and industry. The merchant must set up this service with a bank, and agree to the rate prior to accepting debit and credit cards as payment.

BREAKING DOWN 'Merchant Discount Rate'

The average merchant discount rate is between 1-3% . However, for online merchants, the rate tends to be higher. This applies to merchants that deal both online and in-store. They will often pay a higher rate for their online sales.

RELATED TERMS
  1. Merchant Account

    A type of business bank account that allows a business to accept ...
  2. Merchant Agreement

    A contract between a business and a credit card service provider.
  3. Per Transaction Fees

    An expense a business must pay each time it processes a customer’s ...
  4. Processing Date

    The month, day and year when a merchant’s bank processes a credit ...
  5. Batch Credit Card Processing

    The process of a merchant processing all of its authorized credit ...
  6. Merchant Bank

    A bank that deals mostly in (but is not limited to) international ...
Related Articles
  1. Markets

    What Does a Merchant Bank Do?

    A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations.
  2. Personal Finance

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Personal Finance

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose
  4. Investing

    How Debit Cards Work

    Unlike credit cards, debit cards rely only on the funds available in the user’s account, so they do not let users borrow on credit. They frequently come with purchase limits, and using one at ...
  5. Investing

    10 Reasons To Use Your Credit Card

    Charging purchases is not always a no-no. In fact, there are some very sound reasons for choosing this option.
  6. Entrepreneurship & Small Business

    How Is Cashback Profitable For Credit Card Companies?

    Cashback rewards are not as beneficial to the consumer as they might initially seem.
  7. Personal Finance

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  8. Personal Finance

    WePay vs. PayPal Fees

    WePay and Paypal facilitate payments between businesses and people. Which one should you go with?
  9. Managing Wealth

    4 Tips For Using Credit Cards Overseas

    Overseas travel can be both confusing and expensive, so here are some ways to minimize the cost of spending abroad.
  10. Entrepreneurship & Small Business

    Spring: How it Works and Makes Money

    Read about Spring, a customer loyalty program and digital advertising company, and learn more about how it connects retailers and consumers.
RELATED FAQS
  1. What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different ... Read Answer >>
  2. Why do credit card companies calculate revenue splits in terms of basis points?

    Discover how revenue splitting works and how credit card companies are able to utilize basis points in revenue splits to ... Read Answer >>
  3. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
  4. Why do long-term care insurers require the loss of two Activities of Daily Living ...

    Find out why an importing or exporting merchant might turn to a banker's acceptance to help facilitate an international trade ... Read Answer >>
  5. How do prepaid debit cards work?

    Learn about how prepaid debit cards work, including where they are accepted and how the financial part works like a checking ... Read Answer >>
  6. What happens when my bank account is debited?

    Understand the process that takes place when your account is debited. A debit to your account happens when you use funds ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center