Merchant Discount Rate

AAA

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.

INVESTOPEDIA EXPLAINS '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. Debit Card

    An electronic card issued by a bank which allows bank clients ...
  2. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  3. Merchant Account

    A type of business bank account that allows a business to accept ...
  4. Credit Card

    A card issued by a financial company giving the holder an option ...
  5. Commercial Bank

    A financial institution that provides services, such as accepting ...
  6. Merchant Bank

    A bank that deals mostly in (but is not limited to) international ...
RELATED FAQS
  1. What are the advantages and disadvantages to dealing with internet-only banks?

    In recent years, large companies have set up internet-only banks as a means of diversifying into the financial sector and ... Read Full Answer >>
  2. 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 Full Answer >>
  3. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  4. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
  5. What were the primary financial crimes involved in the ZZZZ Best case?

    ZZZZ Best was a company started by Barry Jay Minkow that claimed to be a carpet cleaning business. In fact, it was a Ponzi ... Read Full Answer >>
  6. Can a creditor sue me for a delinquent account?

    If a credit card account becomes delinquent, the creditor can sue the debtor for the balance as soon as the delinquency occurs. ... Read Full Answer >>
Related Articles
  1. Retirement

    Tired Of Banks? Try A Credit Union

    These nonprofit organizations can provide a range of services for lower fees.
  2. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  3. Budgeting

    Should You Pay In Cash?

    Avoiding all forms of plastic payment can do wonders for your stress level and pocket book.
  4. Options & Futures

    The Ins And Outs Of Bank Fees

    These service charges could nickel and dime you right out of your nest egg.
  5. Credit & Loans

    American Express Cards: Centurion Vs. Platinum

    If you're offered a coveted black card from AmEx, should you accept it?
  6. Credit & Loans

    Credit Cards Offering The Most Airline Miles

    Besides one mile for every dollar spent on purchases, you can rack up thousands more – up to 50,000 – thanks to these cards' intro offers and bonus points.
  7. Economics

    What Does a Creditor Do?

    A creditor is a person or entity that loans money or provides goods or services to another entity with the expectation of being paid back in the future.
  8. Credit & Loans

    Review: Chase IHG Rewards Club Select Credit Card

    This rewards card gives you instant platinum elite status at more than 4,700 Intercontinental Hotel Group properties. Does that make it worth having?
  9. Budgeting

    What is Discretionary Income?

    Discretionary income is an economic term referring to income left over after a person pays taxes and living expenses.
  10. Credit & Loans

    Credit Card Review: Citi ThankYou Premier Credit Card

    This higher-end card provides a wide range of rewards types. The question is: Are they rich enough to be worth the annual fee after the first free year?

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!