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April 7, 2021
by David Goodale

What is a discount rate?

Learn what the discount rate is, and why it's the most important and significant cost when processing credit card transactions.

(Slightly edited from video transcript for greater readability)

Hello, David here at Merchant-Accounts.ca. Today I'm going to tackle a simple question: what is a discount rate?

A discount rate it's definitely not a discount, it's actually the most important and expensive aspect of processing credit card transactions. It is a percentage-based fee that you pay every time you clear a transaction. How much that fee is depends on the quote that you get for your business and that will depend on how much money you process. If you're processing a hundred million dollars a month in sales you'll pay a much lower rate than a business processing a thousand dollars per month in sales. I guess that's obvious when I say that out loud.

As far as rates go, it also matters whether you have a high-risk product or a service. For example, if you are running an online casino you're going to get a lot more chargebacks and potential fraud compared to someone you know with a local organic salad shop selling kale sandwiches. This is all relevant to figuring out the discount rate that you will pay for your business.

The discount rate is a percentage based fee that all merchants pay each time a transaction is processed.

How much should the discount rate be for my business?

What you need to know is the discount rate is a percentage-based fee, and that fee should generally not be over 3% if you're selling to customers located in your own country. If you sell across borders the fee will be a little bit higher because Visa and Mastercard assess cross-border fees, which are actually beyond the scope of what I'm intending to get into today.

Summary

You should be paying a percentage-based fee every time you process a credit card transaction. That fee should be based on your transaction volume. If you have any questions and if you want to view our rates, or to get a quote for your business then contact us as we'd love to hear from you.

I hope this was helpful, and that it demystified it the discount rate a little bit. Have a good day.


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David Goodale About the Author

My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.

Toll free: 888-414-7111 ext. 5
Direct: (905) 901-2254
david.goodale@merchant-accounts.ca

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