What is Merchant Discount Rate | chargebackhit.com

Merchant Discount Rate


The merchant discount rate (MDR) is a fee businesses pay to payment processing companies for debit and credit card transactions. It is usually a percentage of the transaction amount, also known as the transaction discount rate (TDR).

Merchants must agree to this rate when setting up the service to accept debit and credit cards. The MDR typically ranges from 1% to 3%. Part of this fee goes to the credit card issuer as an interchange fee.

Managing these fees is essential for businesses to set their prices effectively. In some states, merchants can impose a surcharge on debit and credit card users to help cover the added costs.

To accept card payments, businesses set up accounts with payment processors that serve as intermediaries between the business and card issuing banks. Payment processors have established infrastructures and fee schedules in place, and most merchants can expect to pay a 1% to 3% fee for each transaction.