Merchant discount rate

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The Economic Times  Oct 19  Comment 
It is the invisible charge that consumers pay to banks in establishments that accept payment cards. It is invisible because the payment is made by a merchant to his bank in the first instance.




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This is the fee charged to merchant by an acquiring bank - this bank processes the card sales drafts and credits the funds to the merchant's account. The merchant discount depends on sales volume; it generally declines as sales volume increases, and it is negotiated individually with each merchant. For example, if the merchant discount is 3%, the merchant keeps $97 for every $100 in sales. Included in the merchant discount rate is an interchange fee, which is paid to the bank that issued the credit card that was used in each transaction, and an additional percentage that is the profit for the acquiring bank.

See also: Credit Card Industry

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