What is the merchant discount rate (MDR)?
The merchant discount rate (MDR) is the total fee a merchant pays to accept a card payment, shown as a percentage of the sale, often with a fixed amount. It combines interchange paid to the issuer, scheme fees paid to the card network and the acquirer’s or PSP’s margin. In Europe it is called the merchant service charge.
In detail
The merchant discount rate (MDR) is the total fee a merchant pays to accept a card payment. It is expressed as a percentage of the sale, often with a fixed amount per transaction, and it is deducted before the merchant receives the money. In Europe and the UK, the same fee is called the merchant service charge (MSC).
What the MDR contains
- Interchange: paid to the bank that issued the card.
- Scheme fees: paid to the card network, such as Visa or Mastercard.
- Markup: kept by the acquirer, PSP or PayFac for processing, risk and service.
What it does not contain
Terminal rental, gateway fees, chargeback fees and monthly minimums are usually billed outside the MDR. Two offers with the same headline rate can therefore have different total costs.
For a PayFac or platform, there are two MDRs: the buy rate paid to the acquirer and the sell rate charged to merchants. The difference is its payment revenue. Full explanation in What Is the Merchant Discount Rate (MDR)?.