Who pays the merchant discount rate?

Who pays the merchant discount rate?

• A. Cardholder
• B. Issuer
• C. Card network
• D. Merchant

Answer: (D)

The merchant discount rate is the cost a merchant incurs for accepting card payments. When a customer pays by card, the acquiring bank or processor charges the merchant a discount rate that covers the interchange paid to the card issuer, plus network fees and the processor’s margin. The merchant ultimately bears this cost, as it’s deducted from the funds the merchant receives from the sale. The cardholder pays the price of the goods or services, but MDR is not paid directly by the cardholder. The issuer and card network receive their fees as part of the processing, but the payer of the merchant discount rate is the merchant.

The merchant discount rate is the cost a merchant incurs for accepting card payments. When a customer pays by card, the acquiring bank or processor charges the merchant a discount rate that covers the interchange paid to the card issuer, plus network fees and the processor’s margin. The merchant ultimately bears this cost, as it’s deducted from the funds the merchant receives from the sale. The cardholder pays the price of the goods or services, but MDR is not paid directly by the cardholder. The issuer and card network receive their fees as part of the processing, but the payer of the merchant discount rate is the merchant.