Merchant Discount RateMDR

The percentage fee a merchant pays on each card or electronic sale, covering the acquirer, card scheme, and related processing costs.

Formula

Fee = sale amount × MDR (plus any fixed per-transaction fee if charged)

Also called merchant service fee, card acceptance fee.

The merchant discount rate is what a shop effectively gives up on a card sale. If MDR is 2 percent on a 1,000 sale, the merchant receives about 980 after the percentage fee, before any extra fixed charges.

Key takeaways

MDR often bundles scheme fees, acquirer margin, and sometimes gateway costs into one rate.
Card type, sector risk, and monthly volume can change the rate a merchant is offered.
Lower MDR improves margin; higher MDR may still be worth it if card sales raise total turnover.
Quoted rates can exclude setup fees, rental for terminals, or chargeback penalties.

Related terms

Acquiring BankThe bank or payment firm that signs up merchants, accepts their card transactions, and settles funds into the merchant account.
Card IssuerThe bank or licensed firm that gives you a debit, credit, or prepaid card and stands behind the payments you make with it.
Point of Sale TerminalA device or software at a merchant that accepts card, wallet, or contactless payments and sends them for authorisation.
Payment GatewaySoftware that securely passes card or wallet payment details from a merchant site or app to the banks and networks that settle the charge.