What the merchant discount rate is made of
- Interchange: paid by the acquirer to the card's issuer
- Scheme fees: paid to the card network
- Acquirer margin: the acquirer's own costs and profit
The word discount comes from the mechanics: the acquirer settles the merchant's sales at a discount, paying out the value of the sales less the fee. Many contracts add a fixed fee per payment and separate charges for refunds, chargebacks and terminals, which sit outside the rate.
Blended or unblended rates
A blended rate is one percentage for all cards. An unblended price sets a rate for each brand and category of card, or passes interchange and scheme fees through at cost, as in Interchange++.
In the EU, Article 9 of the regulation has acquirers offer and charge merchant service charges specified individually for different categories and brands of cards, unless the merchant asks in writing for blended charges. After each card payment the acquirer gives the merchant the amount of the charges, with the merchant service charge and the interchange fee shown separately (Article 12).
Why the merchant discount rate matters
For a merchant the rate is the price of card acceptance, to be compared with other payment methods. For an acquirer or a payment facilitator the rate is revenue, of which only the margin stays: quoting a blended rate means carrying the risk that a merchant's card mix costs more than expected.
Where the merchant discount rate shows up in a platform
Modules that do the work
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- Merchant onboardingBusiness sign-up, verification and underwriting, from application to first payment.
- Analytics & monitoringProduct analytics, attribution, engagement and crash reports, on a tracking plan you control.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.