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.