Discount Rate Definition

By Phillip Parker

Last Updated: April 4, 2011

Merchant Account Discount Rate Explained:

What is a Discount Rate? Often called the “Merchant Account Discount Rate” or just the “Discount Rate,” the Merchant Discount Rate is one of two fees that merchants experience when they charge a credit card. For example, in a quoted processing rate of 1.79% + $0.25 per transaction, the Merchant Discount Rate is the 1.79% part of the processing fee. In other words, the Merchant Discount Rate is the percentage half of the processing fee. You can think of it as the percentage discounted from the money you will receive from the sale.

The Merchant Discount rate comes from Visa and Mastercard’s Interchange fee system and is usually divided into three rate tiers: Qualified (lowest rate), Mid-Qualified (middle rate), and Non-Qualified (highest rate). The type of credit card used in a sale will dictate at which tier the processing fee will be charged to the merchant.

Discount Rate Video Explanation

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About The Author

Phillip Parker

Phillip Parker is an independent card payment expert specializing U.S. and Canadian point-of-sale, e-commerce, and mobile payment acceptance. He has nearly two decades of experience in credit card processing as a journalist and consultant. Phillip is the creator of this website and has written over 1,500 articles covering numerous payment acceptance topics. He has also published critical reviews about most merchant services providers currently in operation.

Expert Guidance

Phillip has consulted businesses of all sizes from mom-and-pop shops processing $10K per month to enterprise level organizations processing in excess of $300MM annually. His specialties include:

– Merchant Account Statement Auditing
– Rate & Fee Negotiation
– Processor & POS Selection
– Software Integrations
– Risk Assessment
– Fraud Prevention
– General Processing Advice

Schedule a Consultation Here

Phillip’s Top Picks

Phillip has researched and reviewed over 1,000 merchant services providers over the last 15 years. He also owns multiple businesses that accept credit card payments. If you are looking for an ethical credit card processor that doesn’t hide fees or lock you into expensive contracts, see Phillip’s merchant account picks here.

In The Media

In addition his contributions on CPO, Phillip has also been quoted in several major publications such as The Los Angeles Times, INC Magazine, Miami Herald, Computer World, and numerous others. If you would like to interview Phillip for your story or podcast, please reach out here.

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