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Merchant Account Discount Rate – Explained

Posted by Alex Neir on Tue, March 01, 2011 @ 01:34 PM
Discount Rate

Merchant Account Discount Rate – Explained

What is the discount rate on a merchant account? This is a very common question. The discount rate is the fee charged for running a credit card transaction. There are typically multiple discount rates associated with a merchant account. The number of rates depends on the pricing that has been set up on the account. The 3 most common pricing structures are ERR Pricing, Tiered Pricing and Interchange Pricing.

In order to determine the discount rate that will apply for a specific transaction you must first examine the details on how the credit card information is captured and what type of credit card is being used. Is the credit card being swiped through a terminal or keyed into the terminal? NOTE: Keyed into the terminal also includes customers typing their credit card information on a website. Next, what type of credit card is being used? A check card, debit card, rewards card, corporate card, international card, etc. These details ultimately drive the discount rate that will apply.

Let’s look at an example based on a tiered pricing structure.

For our example we’ll use a 3 tier model. Each tier is identified as follows:

  • Qualified Discount Rate – Card swiped through a terminal
  • Mid-Qualified Discount Rate – Card keyed into a terminal or a rewards card
  • Non-Qualified Discount Rate – International card or corporate card

Each specific tier will have a discount rate associated with it:

  • Qualified – 1.79%
  • Mid-Qualified – 2.39%
  • Non-Qualified – 3.09%


Credit Card Transaction Amount = $100

Transaction Deatils

Interchange Fee

Discount Rate


Swiped, Check Card




Swiped, Rewards Card




Check Card, Keyed In




Keyed In, Rewards Card




Swiped, International Card





Would you like to understand credit card pricing and which pricing structure is right for your business? Please give our friendly staff a call and we would be happy to consult with you. (800)917-8026

Tags: Interchange Fees, Discount Rate, Tiered Pricing