What is a discount rate?
The Discount Rate is the percentage that gets discounted (deducted) from the transaction amount. The Discount Rate is the rate that gets paid for the most part to the bankcard company (Visa, MasterCard, etc.), the Issuing Bank (the bank that issued the bankcard to your customer) and the Acquiring Bank (the bank that the merchant processes with). It is called a Discount Rate since this is the percentage that gets discounted off the transaction amount at the time of payment processing. Thus, if the transaction amount totals $100.00, and your Discount Rate is 2.50%, then a total of $97.50 will be deposited into the merchant’s account. The most important factor in determining the merchant’s Discount Rate is the transaction method the merchant uses. There are other factors as well, such as monthly processing volume and type of industry the merchant is in. Therefore a Discount Rate is predetermined by the Acquiring Bank or Processor and can not be set by the merchant.
A discount rate is a percentage of each transaction charged to the merchant. Every bank charges a discount rate to merchants that accept credit cards. The discount rate charge is the lowest for transactions that carry the least amount of risk and higher for transactions that carry more risk of fraud and chargeback.
