Merchant Discount Rate

Merchant Discount Rate (MDR), also known as Transaction Discount Rate (TDR),  refers to transaction processing fees charged to merchants and businesses for debit or credit card transactions. Expressed as a percentage of purchase volume, the MDR covers costs like interchange fees, assessment charges from networks like Visa or Mastercard, and a margin for the acquirer.

Rates vary across industries, transaction types, and payment models – from qualified card-present to non-qualified card-not-present transactions. Large retailers may negotiate their pricing while smaller merchants adopt standard pricing. Factors impacting MDRs also include:

• Transaction value – micropayments increase costs
• Merchant category code – considered higher risk draws higher rates
• Chargeback rate – more disputes mean more costs
• Processing volume or time with acquirer – higher commitment earns discounts

Optimizing and reducing MDRs lowers operational costs and improves profit margins. Merchants aim to qualify transactions at the lowest interchange tiers and negotiate the best interchange-plus pricing through thorough cost-benefit analysis.