The discount rate is one of the processing fees charged to your merchant account. There are various fees associated with having a merchant account. These could vary, depending on the type and company providing the service, but all merchant accounts have 2 main costs:
- Discount Rates: With most merchant service providers, every processed sale is classified into 1 of 3 qualification levels (Qualified, Mid-Qualified, & Non-Qualified), and is charged a discounted percentage rate associated with that qualification. Each sales level and rate is determined by the type of card used, and/or how it is accepted and processed.
- Transaction or Authorization Fee: This fee is charged for each electronic authorization request and transaction made, including all approved and declined sales, returns, voids, and batch settlements.
The discount rate is simply, a percentage charged on each transaction. It is usually lower if you are swiping cards, and higher if you are keying them in or taking Internet transactions. For example, if you are set up with a discount rate of 2.5%, and you charge a customer $100, the discount fee would be $2.50....