Most businesses are aware how complex credit card merchant fees can be. Other than the credit card transaction fees a business incurs, there is also the Discount Rate which co exists with them. The discount rate is simply the profit over the interchange rates a business is charged. Unlike interchange fees, the discount credit card merchant fees are in fact negotiable. Continue reading to learn more about these credit card merchant fees or check out our Complete Guide to Lowering Credit Card Merchant Fees.

Credit Card Merchant Fees – What is the Discount Rate?                                                                         

The discount credit card merchant fees are the percentage rates that are added to your account which are charged to a business OVER the interchange fees a business incurs. If you are not familiar with interchange fees, these credit card merchant fees are non-negotiable. They are passed along from the card networks – the most widely known networks are Visa, MasterCard, Discover, and American Express – and they are updated typically every April and October.

The discount rate however, is a fee added on top of the interchange (if you are on Interchange Plus Pricing) and is considered the service profit markup a bank, credit card processing company, or ISO generates allowing a business to accept credit cards.

A discount rate is also calculated and relayed to business owners in the form of basis points. Often credit card processing companies will refer to this credit card merchant fee as the “basis points over interchange” when relaying pricing quotes. Below is an example:

• Interchange + 0.30% + $0.10/transaction.

The discount rate, which in this case is 0.30%, is the mark up a credit card processing company profits on every transaction a business processes during a given month. Converting the verbiage to basis points, this would equal thirty basis points for the above example.

Discount Rate – What To Lookout For

The discount rate is a credit card merchant fee that a business should monitor monthly as credit card processing companies are notoriously known to increase this credit card merchant fee throughout the year. A credit card processor can also add a surcharge, in the form of discount rate, that is added to the agreed upon percentage rate in a business’ initial contract signing with their credit card processing company.

One deceptive sales tactic used in credit card processing that relates to the discount fee is using misleading verbiage when discussing basis points to a current or prospective client.

For example, a credit card processing company may tell a business that they will only be charged two percent for all credit and debit card transactions. However, what they fail to tell the business is that this also can mean two hundred basis points – 2.00% is two hundred basis points – and the credit card processing company does not tell the business that this is 200 basis points ADDITIONAL to the interchange fees a business will incur.

This is one of the more deceptive sales tactics in credit card processing. Learn other deceptive credit card merchant fee sale tactics reps make in the payment industry. Always have your statements audited quarterly, at a minimum, to ensure your credit card merchant fees have not increased and that your business is priced appropriately.